Property Developer Disqualified for Fraudulent Transfer of Company Assets

When a company slides towards insolvency, the temptation for a director to move valuable assets beyond the reach of creditors can be considerable. The law in England and Wales treats such conduct with the utmost seriousness. The Insolvency Act 1986 not only empowers a liquidator to unwind transactions designed to defeat creditors, but also creates criminal offences carrying custodial sentences and director disqualification. A recent case heard at Leeds Crown Court demonstrates precisely how these powers operate and how a winding-up petition can set in motion an investigation that exposes serious wrongdoing years after the event.

A would-be property developer from Bradford, was disqualified from acting as a company director for four years and handed a suspended custodial sentence after pleading guilty to fraudulently transferring company property contrary to the Insolvency Act 1986. The case arose from the collapse of his company, Reeson Homes Ltd, which was wound up by the court following a winding-up petition () presented by an unpaid creditor owed more than £40,000. For creditors who suspect that a debtor company is dissipating its assets, and for directors uncertain of their duties as insolvency looms, the case is a stark reminder of why specialist legal advice must be obtained without delay.

Case Background: The Collapse of Reeson Homes Ltd

Reeson Homes Ltd was incorporated in late 2014, with Hussain as its sole director. In 2015 the company acquired two linked plots of land at Sandy Lane in the Allerton area of Bradford with a view to developing the site. Development work began in 2016, and the company engaged a number of contractors, including the Bradford demolition firm Thomas Crompton, to carry out works.     

As the project progressed, Reeson Homes accumulated substantial debts that it could not pay. Thomas Crompton alone was owed £40,000. Cheques issued by Hussain to settle part of that liability were dishonoured. By early 2017, with creditors closing in and the company facing insolvency, Hussain took steps that the Insolvency Service would later describe as a deliberate effort to ensure that those owed money were never repaid.  

In February 2017, the Sandy Lane land was transferred out of Reeson Homes Ltd to a newly created company, Paddington Homes Ltd. That second company had been incorporated on the very same day Hussain instructed solicitors to affect the transfer, with his partner installed as its sole director. Although the transfer documents recorded a purchase price of £250,250, no money in fact changed hands. Hussain then claimed that the land had been sold to an unconnected third party and that payment had been received.

A creditor owed more than £40,000 for work carried out on the Sandy Lane site presented a winding-up petition against Reeson Homes Ltd, and the company was wound up by the court in June 2017. The appointment of an Official Receiver (the court-appointed official who investigates how and why a company has failed) set in motion the inquiry that would ultimately unravel the scheme.      

In the months that followed, Hussain repeatedly made false statements to insolvency practitioners, creditors and official investigators. At a creditors’ meeting he described the land as having been sold to an unconnected party, and he told the Official Receiver that he had no personal connection to Paddington Homes Ltd – despite his own partner being its director.

The land was eventually recovered through civil proceedings brought by the liquidator at Bradford County Court in 2019, and Thomas Crompton ultimately recovered the money it was owed through the subsequent sale of the land.

The Sentence: Disqualification and a Suspended Custodial Term

Hussain pleaded guilty, on the first day of his trial, to an offence of fraudulently transferring company property under the Insolvency Act 1986. At the sentencing hearing the court heard that, although he had 22 previous convictions, none was of a similar nature. In mitigation it was said that the transfer had been intended to protect family money, that his marriage had broken down as a result of the case, that he had been made bankrupt, and that he was now working on a commission basis at a car sales business.   

Sentencing him, the judge observed that Hussain had transferred the land to a company controlled in substance by him while disclaiming any knowledge of who the new landowners were, and had used a false name in connection with the winding-up petition. The judge characterised the matter as a case of serious, deliberate dishonesty aimed at frustrating the work of the Insolvency Service.

Hussain received a six-month custodial sentence, suspended for twelve months. He was ordered to complete 180 hours of unpaid work, to pay £1,000 in costs to the Insolvency Service, and was disqualified from acting as a company director for four years.

What Is a Winding-Up Petition?

A winding-up petition is a formal application to the High Court by a creditor under section 122(1)(f) of the Insolvency Act 1986, seeking a court order to compulsorily liquidate a company that is unable to pay its debts as they fall due. It is the most powerful debt-enforcement tool available to a creditor in England and Wales.           

To present a petition, a creditor must establish that the debt exceeds the statutory threshold of £750, that it is undisputed, and that the company has failed to pay. This is typically evidenced by an unsatisfied statutory demand that has not been complied with or set aside within 21 days, or by an unenforced court judgment. Once the petition is served, the creditor may advertise it in the London Gazette after seven days. Advertisement is a critical pressure point: most banks will freeze the company’s accounts on notification, because section 127 of the Insolvency Act 1986 renders void any disposition of company property made after presentation of the petition without court approval via a validation order. 

If the petition is not resolved before the hearing, the court may make a winding-up order, upon which the Official Receiver is appointed as liquidator. The directors immediately lose authority to act, employees are dismissed by operation of law, and the liquidator takes control of the company’s assets and records – including the power to investigate, and where necessary unwind, transactions entered into before the liquidation.

Fraudulent Transfer of Company Property and Transactions Defrauding Creditors

This case turns on one of the most serious forms of misconduct in insolvency law: the removal of assets from a company to place them beyond the reach of creditors. English law addresses this conduct on two fronts: civil and criminal.

Civil Clawback: Undervalue Transactions and Transactions Defrauding Creditors

A liquidator (or administrator) has extensive statutory powers to challenge transactions entered into before a company’s insolvency:

• Transactions at an Undervalue (section 238, Insolvency Act 1986): where a company has, within the relevant period before insolvency, transferred an asset for no consideration or for significantly less than its true value, the court may restore the position to what it would have been. The transfer of the Sandy Lane land for a recorded but entirely unpaid sum of £250,250 is a textbook example of a transaction vulnerable to challenge.
• Transactions Defrauding Creditors (section 423, Insolvency Act 1986): this powerful provision applies where a transaction at an undervalue was entered into for the purpose of putting assets beyond the reach of creditors, or of otherwise prejudicing their interests. Crucially, there is no statutory limitation period for a section 423 claim, and it may be brought by a “victim” of the transaction as well as by a liquidator.
• Preferences (section 239, Insolvency Act 1986): where a company has placed a creditor in a better position than it would otherwise have occupied on insolvency, the court may reverse the preference.

In this case, the liquidator pursued civil proceedings and successfully recovered the land, allowing the principal creditor to be paid from its sale. This illustrates that asset-stripping is rarely the end of the story: the liquidator’s clawback powers exist precisely to undo it.

Criminal Liability under the Insolvency Act 1986

Beyond civil recovery, the Insolvency Act 1986 creates a series of criminal offences targeting dishonest conduct in insolvency, including the fraudulent removal or concealment of company property and the making of false representations to creditors and investigators. An offence of fraudulently transferring company property, to which Hussain pleaded guilty, can result in imprisonment, unpaid-work requirements, costs orders and, almost invariably, director disqualification. The Insolvency Service investigates and prosecutes such offences and works alongside the Official Receiver to hold dishonest directors to account.

The use of a false identity, the incorporation of a phoenix-style company controlled by a connected party, and repeated false statements to investigators are all aggravating features that move a case firmly into the criminal sphere.

Instruct Expert London Insolvency Lawyers

Whether you are a creditor seeking to recover a debt from a company that may be dissipating its assets, a liquidator investigating suspect transactions, or a director concerned about your duties and exposure as insolvency approaches, our expert barrister and solicitor team can provide immediate, expert advice and representation.

Our City of London insolvency team has decades of experience acting for petitioning creditors and directors alike, across all sectors including property and construction. We advise on statutory demands, winding-up petitions, validation orders, transactions defrauding creditors, director disqualification and hearing representation. Time is the single most important variable in insolvency proceedings – the options available today narrow with every day that passes without specialist intervention. Contact now for an immediate case assessment.