The Supreme Court’s decision in Bilta (UK) Ltd v Tradition Financial Services Ltd has changed the landscape for fraudulent trading claims in England and Wales. Traditionally focused on directors and company insiders, section 213 of the Insolvency Act 1986 can now be used against a much wider group — including advisers, brokers and other third parties. This has serious implications for professionals who work with companies in financial distress.
What does section 213 of the Insolvency Act 1986 cover?
Section 213 allows liquidators to recover funds from individuals who carried on a company’s business with the intent to defraud creditors or for a fraudulent purpose. This is a civil provision, aimed at compensating creditors rather than punishing wrongdoing.
To succeed, a claim must show that someone knowingly participated in the fraudulent conduct and acted dishonestly. Courts apply an objective test of dishonesty — asking whether the conduct would offend ordinary, decent business standards. Importantly, the scope of section 213 is not limited to company officers. It extends to anyone who helps facilitate fraudulent trading — including from outside the business.
How has the Supreme Court changed the rules on third party liability?
The Bilta case concerned a financial intermediary allegedly involved in fraudulent VAT trading. The Court held that section 213 is not limited to directors or managers. It applies to third parties who knowingly assist with fraudulent transactions.
This ruling means external professionals — such as brokers, accountants, or advisers — can be held liable if they turn a blind eye or otherwise support dishonest trading. Their lack of formal control is no defence.
Who might now be exposed to dishonest assistance claims?
Following Bilta, anyone who knowingly assists in fraudulent trading could face claims. This includes:
- Advisers who help design or promote dishonest schemes
- Brokers who facilitate suspect transactions
- Suppliers who continue trading despite knowing the company is insolvent
The courts require actual or “blind eye” knowledge and will judge dishonesty by commercial standards. This places all professionals under a duty to question irregular or unethical conduct.
What does this mean for advisers, intermediaries and directors?
Advisers and intermediaries now face increased liability risk. Working with insolvent businesses is not unusual — but continuing to assist where fraud is evident can result in personal exposure. Directors remain liable under existing rules, but now they are joined by a wider range of potential defendants.
To reduce risk, professionals should:
- Undertake careful due diligence
- Be alert to red flags and act where necessary
- Document concerns and advice
- Maintain strong internal compliance systems
Bilta makes clear that ethics and legal standards apply to all commercial participants — not just those at the top.
How can liquidators and creditors use this ruling to recover losses?
Liquidators can now target a broader range of individuals, helping to increase recoveries for the benefit of all creditors. Pursuing advisers or intermediaries may be more commercially viable than suing directors alone.
To build a case, liquidators must prove knowledge, participation and dishonesty. Evidence of communication, transaction records, and financial gain will be key. The courts can apportion liability among several defendants, making section 213 claims adaptable and effective.
Ultimately, Bilta strengthens the hand of liquidators and sends a strong message: participating in fraudulent trading — even indirectly — can come at a high cost.
