In an article for Disputes Magazine, Haynes Boone Partner Michael Mulligan and Associate Charlotte Doherty explore the recent shift in the English courts’ approach to transactions at an undervalue.
Read an excerpt below:
The past eighteen months have seen a significant shift in the English courts’ approach to transactions at an undervalue (TUV) claims in insolvency and enforcement proceedings. Once governed by a relatively settled framework, the law has been reshaped by a series of important decisions: El-Husseiny v Invest Bank PSC [2025] UKSC 4 (“El-Husseiny”), Commercial Bank of Dubai PSC v Abdalla Juma Majid Al Sari & Ors [2025] EWHC 1810 (Comm) (“Al Sari”), Malik v Messalti [2024] EWHC 2713 (Ch) (“Malik”), and Purkiss v Kennedy [2025] EWCA Civ 268 (“Purkiss”). Together, these cases signal a decisive movement away from formalism and towards an emphasis on substance, with courts increasingly willing to scrutinise the real-world effect and purpose of transactions.
The Legal and Policy Framework
English insolvency law allows the courts to set aside transactions at an undervalue – where assets are transferred for significantly less than their true worth – under sections 238, 339 and 423 of the Insolvency Act 1986.
- Section 238 applies to companies in formal insolvency.
- Section 339 applies to individuals in bankruptcy.
- Section 423 is broader, enabling any victim to challenge a transaction if it was entered into for the purpose of putting assets beyond the reach of creditors or prejudicing their interests.
The policy objective is clear: to prevent debtors from undermining the collective interests of creditors by dissipating value prior to insolvency. An important part of a section 423 claim is the “purpose test,” which requires the court to be satisfied that the debtor’s intention was to prejudice creditors, rather than acting for a legitimate commercial or tax reason. The test has proved to be a recurring point in litigation, and recent case law has sharpened its application.
