THE Supreme Court’s decision in Bilta (UK) Ltd. (in liquidation) and others v Tradition Financial Services Ltd. [2025] UKSC 18, [2026] A.C. 140 (“Bilta”) marks a significant development in the law of fraudulent trading and has potentially far-reaching consequences for professionals operating at the edges of distressed companies. The judgment confirms an expansive interpretation of the Insolvency Act 1986, section 213 (“IA 1986”), raising the question of whether it now represents a powerful new route to recovery for liquidators seeking redress from deep-pocketed defendants.

The proceedings arose out of the insolvency of a group of companies alleged to have been engaged in missing trader intra-community (“MTIC”) fraud, a form of VAT fraud involving the importation of VAT-free goods from other EU Member States, their domestic resale with VAT charged and the subsequent liquidation of the trading entities leaving substantial VAT liabilities unpaid to His Majesty’s Revenue & Customs (“HMRC”). Bilta (UK) Ltd. and related companies (“Bilta companies”) were alleged to have participated in such schemes and ultimately entered liquidation. Tradition Financial Services Ltd., an interdealer broker, facilitated transactions said to be central to the fraud. The liquidators pursued claims against Tradition Financial Services Ltd. both for breaches of fiduciary duty owed by the Bilta companies’ directors to the Bilta companies and for fraudulent trading under IA 1986, section 213. Tradition Financial Services Ltd. resisted liability, contending, among other things, that the dishonest assistance claims were time-barred by the applicable six-year limitation period and that IA 1986, section 213 could not extend to a party lacking any role in the management or control of the Bilta companies. By the time the matter reached the Supreme Court, two issues remained: whether IA 1986, section 213 is capable of applying to third parties who knowingly participate in fraudulent trading without exercising managerial control and the effect of the Bilta companies’ period of dissolution on the limitation period in respect of the dishonest assistance claims.

On the issue of to whom IA 1986, section 213 extends, the Supreme Court unanimously held that a claim could be brought against an interdealer broker that had no managerial or controlling role within the insolvent company. In doing so, the Court confirmed an expansive interpretation of IA 1986, section 213, one which may materially alter the risk landscape for professionals operating in proximity to fraudulent businesses. The decision invites renewed consideration of the relationship between IA 1986, section 213 and the more familiar equitable claim for dishonest assistance. It also raises the question of whether IA 1986, section 213 now constitutes a particularly potent avenue of recovery for liquidators.

IA 1986, section 213 is available only in the context of a winding up and only at the suit of a liquidator or an administrator. Its focus is not misconduct as such, but the manner in which the company’s business has been carried on. Relief is contingent upon proof that the business was conducted with intent to defraud creditors (whether of the company itself or of another) or for a fraudulent purpose. These formulations are broad. Fraudulent activity may be directed against the company whose business is in question or may use that company as a vehicle to perpetrate fraud on others. Provided that the fraud is systematic rather than isolated and that the company later enters liquidation, IA 1986, section 213 is in principle engaged.

The scope of potential defendants is addressed in IA 1986, section 213(2), which permits the court to impose liability on “any persons who were knowingly parties” to the fraudulent carrying on of the business. The requirement of knowledge has long been understood as importing dishonesty, assessed in accordance with the hybrid subjective-objective test, as articulated in Ivey v Genting Casinos UK Ltd. [2017] UKSC 67, [2018] A.C. 391. This requires the court first to ascertain the defendant’s actual state of mind and then to assess whether their conduct was dishonest by the objective standards of ordinary honest people – an approach recently reaffirmed in the IA 1986, section 213 context in Stacks Living Ltd. v Shergill [2025] EWHC 9 (Ch), [2025] B.C.C. 309. The more difficult question, and the one squarely addressed in Bilta, concerns the nature and degree of participation required.

The Supreme Court rejected any suggestion that liability under IA 1986, section 213 is confined to directors or others exercising managerial or controlling functions. Participation need not take the form of decision-making authority within the company. Rather, the provision extends to any person who actively and substantively participates in the fraudulent trading of the company’s business. The participation must be more than passive acquiescence or omission and more than a single, incidental transaction, but it need not involve direct dealings with the company itself. On the facts, Tradition Financial Services Ltd.’s role as an intermediary brokering transactions essential to a VAT carousel fraud was sufficient, notwithstanding the absence of any direct contractual or corporate relationship with the Bilta companies.

This construction positions IA 1986, section 213 as a potentially far-reaching statutory analogue to the equitable doctrine of dishonest assistance. The two causes of action share a common requirement of dishonesty, but they differ in important structural respects. Dishonest assistance claims are not confined to insolvent companies and may be brought by any claimant who has suffered loss as a result of a third party’s breach of trust or fiduciary duty, with the defendant’s assistance. Such claims typically focus on discrete transactions and on professionals who assist company insiders in committing breaches of duty owed to the claimant – see, for example, the recent application of the doctrine in corporate contexts in Stevens v Hotel Portfolio II UK Ltd. [2025] UKSC 28, [2025] 3 W.L.R. 293 and Hopcraft v Close Brothers Ltd. [2025] UKSC 33, [2025] 3 W.L.R. 423.

By contrast, IA 1986, section 213 is narrower in terms of who may sue but broader in terms of who may be sued. It does not require proof of a breach of trust or fiduciary duty owed to the claimant by a third party, nor does it depend upon a relationship of assistance between the defendant and a company insider. Its focus is the fraudulent conduct of the company’s business as a whole and the defendant’s knowing participation in that conduct. As Bilta illustrates, this may encompass professionals and intermediaries whose involvement is with third parties transacting with the company, rather than with the company’s controllers themselves.

The practical consequences of this distinction are considerable. Professionals such as tax advisers, transactional lawyers, corporate financiers and financial intermediaries may find themselves exposed to IA 1986, section 213 claims where they advise upon, structure or facilitate transactions that form part of a fraudulent business, even if their immediate client is an “outsider” and even if they have no influence over the company’s internal governance. The potential reach of IA 1986, section 213 thus extends beyond the traditional targets of dishonest assistance claims.

The Supreme Court also addressed the issue of limitation in relation to the dishonest assistance claims. It accepted that Limitation Act 1980, section 32(1)(b), was engaged in principle, such that the six-year limitation period would not begin to run until the fraud was discovered or could with reasonable diligence have been discovered. Significantly, the Court held that, by virtue of Companies Act 2006, section 1032, the restoration of the Bilta companies to the register required them to be treated as if they had never been dissolved. The relevant question was therefore whether, applying an objective standard of reasonable diligence, the Bilta companies should be assumed to have had directors in place who could have uncovered the fraud during the period of dissolution. The burden lay on the claimants to show that the fraud could not have been discovered earlier and they had failed to do so. Accordingly, the Court concluded that the dishonest assistance claims were statute-barred, notwithstanding the period of dissolution.

It is notable that IA 1986, section 213 is more advantageous to claimants in terms of limitation and remedy. Dishonest assistance claims are subject to Limitation Act 1980, section 32, with time running from discovery of the fraud or when it could reasonably have been discovered. As shown by this case, the reasonable diligence requirement has proved a demanding threshold. By contrast, IA 1986, section 213 benefits from a bespoke limitation period running from the commencement of the winding up, often many years after the relevant conduct occurred. This explains why limitation was not a point of contention in Bilta; there was no limitation difficulty for the claimants pursuing the IA 1986, section 213 claims, hence this was not an issue in dispute by the time the matter reached the Supreme Court.

The remedial consequences are similarly distinct. Dishonest assistance generally yields compensation limited to the consequences of the specific breach of trust or fiduciary duty assisted by the defendant. IA 1986, section 213, however, permits the court to order contributions to the company’s assets by reference to the overall deficiency suffered by creditors as a result of the fraudulent trading, including the costs of liquidation. The causal inquiry is correspondingly broader, focusing on whether the defendant’s participation in the fraudulent trading contributed to the insufficiency of assets.

It remains the case that establishing dishonesty on the part of a professional defendant will be rare. The Supreme Court in Bilta did not dilute that requirement. Nevertheless, by confirming that IA 1986, section 213 is not confined to company insiders and by emphasising its breadth in terms of participation, limitation and remedy, the Court has sharpened the provision’s teeth. For liquidators, IA 1986, section 213 may now represent a more flexible and powerful alternative to equitable claims. For professional firms, the decision serves as a reminder that exposure to insolvency-related liability may arise not only from advising those who control fraudulent companies, but also from facilitating the transactions through which fraudulent businesses are conducted.