What has happened so far? Company A began as a small family-run business specialising in machinery hire and building materials, before expanding into a larger regional contractor. By late 2019, it faced serious financial pressure due to rising industry costs and the constraints of fixed-price contracts. Its cash flow was significantly reduced, to the point that it could no longer meet existing contractual obligations.
In January 2020, Company A’s director (X) authorised the transfer of £2.5 million from Company A to a newly incorporated entity, Company B, for no consideration. Company B had been created shortly before the transfer, and its bank account had a zero balance beforehand. This was followed by further payments between February and October 2020, totalling £4 million, again without any value provided in return.
Six months after the last transfer, £4.5 million was paid from Company B’s account into an account held in the name of the director. Large sums were then transferred to an overseas account, purportedly as interest.
X had sought insolvency advice just days before the initial transfer. A winding up petition was later presented by a creditor of Company A in relation to ten unpaid invoices. When interviewed, X confirmed he had received the January payment and that it had been made without consideration, but gave no explanation for the foreign transfer.
The joint administrators argued that the payments were transactions at an undervalue, made to defraud creditors. They claimed that Company A retained an equitable proprietary interest in the funds, including those held abroad. Proceedings were issued under sections 238 and 423 of the Insolvency Act 1986.
Temple was approached to provide After the Event (ATE) insurance to support the joint administrators in bringing the claim, including cover for investigation and application costs. The funding was instrumental in enabling recovery of the funds held in Company B’s account.
The Temple perspective
Temple supports insolvency practitioners seeking to recover misappropriated company assets for the benefit of creditors. In this case, our ATE cover helped make possible a complex and high-value recovery where wrongful conduct had caused serious harm to the insolvent estate. We are committed to supporting professionals acting in the public interest to challenge conduct that undermines commercial integrity.
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