Company Insolvency

Insolvency claims by and against third parties

Our specialist team advises officeholders, creditors, directors, banks and other third parties.

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Advising on third-party claims arising from insolvency

Protecting your interests in insolvency-related claims

Insolvency does not only give rise to claims against directors. Various third parties can all find themselves involved in claims connected to a company’s insolvency, from validating transactions made after a winding-up petition, to unwinding preference payments transactions at an undervalue made before it. Our Insolvency and Corporate Restructuring team advises on the full range of these claims, acting for officeholders, creditors, directors, banks and other third parties.

"There is a depth of knowledge in the team, with a variety of specialist practitioners." Legal 500 2027

What are insolvency claims against third parties?

Once a company enters, or is heading towards, formal insolvency, certain transactions and dealings involving that company can be challenged, even where the other party was not a director. These claims exist to preserve the company’s assets for the benefit of its creditors, to ensure the company’s assets are distributed fairly and in accordance with the order of priority, and to unwind transactions that unfairly disadvantaged them.
Third parties who may become involved include banks and other lenders, suppliers, connected companies, individual creditors and anyone who received payments, transfers of any asset or a benefit from the company in the period leading up to its insolvency.

Validation orders and section 127 claims

Once a winding-up petition has been presented, section 127 of the Insolvency Act 1986 provides that any disposition of the company’s property made after that point is void, unless the court orders otherwise.

This can catch ordinary trading activity, such as payments into and out of a company’s bank account, as well as one-off transactions. Where a company needs to continue operating, or a third-party needs certainty that a payment or transfer will not later be unwound, an application can be made to the court for a validation order to permit the disposition.

We advise on:

  • applying for a validation order to protect payments or transactions made after a petition is presented
  • advising banks and financial institutions on managing accounts once they become aware of a petition
  • assessing whether a disposition already made is void, and what that means in practice
  • responding to a liquidator’s challenge to a post-petition disposition

Section 236 and 237 applications

Sections 236 and 237 of the Insolvency Act 1986 give liquidators and administrators powerful tools to investigate a company’s affairs. An officeholder can apply to court for an order requiring a person, which may include a director, employee, professional adviser, bank or other third party, to:

  • provide an account of their dealings with the company
  • produce books, papers or other records relevant to the company’s affairs
  • appear before the court to be examined about the company’s affairs

These applications are often used where an officeholder suspects assets have been hidden, dissipated or transferred, or where information needed to pursue a recovery is being withheld.

We advise officeholders on when and how to use these powers and we advise third parties, including banks, accountants and other professionals, who face a section 236 or 237 application.

Reviewable transactions

Certain transactions entered into by a company before its insolvency can be reviewed and in some cases reversed by the court. These are commonly known as reviewable transactions and include:

  • Transactions at an undervalue. Where a company has made a gift or entered into a transaction for significantly less than it was worth, in the two years before insolvency, a liquidator or administrator can apply to have that transaction reversed.
  • Preferences. Where a company has put a creditor, guarantor or surety in a better position than they would otherwise have been in, and was influenced by a desire to prefer them, that preference can be challenged, typically where it occurred within six months (or two years for a connected person) of insolvency.
  • Floating charges. A floating charge granted by a company shortly before insolvency, without new money or value being provided in return, can be set aside under section 245 of the Insolvency Act 1986, so that the charge holder does not gain an unfair advantage over other creditors.

These claims can involve directors, but frequently involve third parties, including lenders, connected companies, business partners and individuals who received a payment or benefit from the company.

How can we help?

We provide tailored advice on insolvency claims involving third parties, including:

  • assessing whether a disposition or transaction is at risk of challenge, before or after insolvency
  • applying for validation orders on behalf of companies, directors or banks
  • advising officeholders on pursuing section 236 and 237 applications, and reviewable transaction claims
  • advising banks, lenders and other third parties served with an insolvency-related application
  • negotiating settlements to resolve claims without the cost and delay of litigation
  • managing claims that involve both third parties and directors, where the two overlap

Our approach is commercial, robust and objective-focused, with a clear emphasis on achieving pragmatic outcomes in complex insolvency disputes.

Get in touch today, we’re here to help

Whether you are an officeholder pursuing a claim against a third party, or a third party facing a claim arising from a company’s insolvency, our team can provide clear, practical advice on your position, potential liabilities and the options available to you.

We have offices across Cambridgeshire, Essex and Hertfordshire, but we can help you wherever you are in England and Wales.

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