On 7 May 2025, the UK Supreme Court delivered its judgment in Bilta (UK) Ltd (in liquidation) v Tradition Financial Services Ltd [2025] UKSC 18, addressing the application of Section 32 of the Limitation Act 1980 to companies dissolved and later restored to the register.
The Court also clarified who can be liable for fraudulent trading under Section 213 of the Insolvency Act 1986, confirming it extends beyond persons exercising management or control over a company to include any individuals who dishonestly assist or contribute to fraudulent business activities aimed at defrauding creditors.
Background
Bilta (and four other claimant companies), now in liquidation, were involved in a 2009 VAT carousel fraud involving carbon credit trading, resulting in substantial VAT liabilities to HM Revenue and Customs and the subsequent insolvency. Tradition Financial Services Ltd (Tradition) was alleged to have knowingly facilitated the fraudulent transactions.
In addition to the fraudulent trading claims, two of the claimant companies, Nathanael Eurl Ltd and Inline Trading Ltd, were dissolved in 2011 and 2010 respectively and then restored to the register in 2012 and 2015. In 2017, their liquidators brought claims for dishonest assistance against Tradition. As the fraud had occurred in 2009, the six-year limitation period meant the claims should have been raised by 2015.
The liquidators relied on Section 32 of the Limitation Act 1980, which extends the limitation period where the fraud could not, with reasonable diligence, have been discovered earlier. They argued that during the periods when the companies were dissolved they had no directors, and no-one else (such as a liquidator) who could have exercised reasonable endeavours to discover the fraud. As a result, the "clock" did not begin to run on the claims for dishonest assistance until they were each restored to the register.
The key issues to be determined were as follows:
- whether the period of dissolution, and the resulting absence of officers, was enough to demonstrate that the fraud could not reasonably have been discovered earlier; and
- whether Tradition was caught within the scope of Section 213 of the Insolvency Act 1986 as being “persons who were knowingly parties to the carrying on of the business” of the company for a fraudulent purpose.
Issue 1) Is dissolution enough?
The Supreme Court unanimously rejected this aspect of the appeal and held that the dissolution of a company does not automatically suspend the requirement to demonstrate reasonable diligence under Section 32 of the Limitation Act 1980. While restored companies are deemed to have continued in existence during the dissolution period, under Section 1032 of the Companies Act 2006, this does not negate the need for factual evidence showing why the fraud could not reasonably have been discovered. The question of what would have happened if the companies had not been dissolved was not to be treated as a matter of speculation or assertion. It was a question of evidence.
The Court concluded that dissolution alone is insufficient to establish a lack of reasonable diligence. The claimants failed to show that under the counter-factual position (rather than the historic position) where the companies had not been dissolved, they could have, with reasonable diligence, discovered the fraud. Consequently, the dishonest assistance claims brought in 2017 were time-barred.
Issue 2) Could Section 213 of the Insolvency Act 1986 apply to Tradition?
In short, yes. The Supreme Court confirmed the judgment of the Court of Appeal and rejected the argument that section 213 is restricted to persons exercising management or control over the company in question, noting that there was "nothing in the language of section 213(2) which restricts the scope of the provision" in this way.
The Court went on to clarify that the natural meaning of the provision is "wide enough to cover not only such “insiders” but also persons who were dealing with the company if they knowingly were parties to the fraudulent business activities in which the company was engaged". This includes parties who transacted with the company "in the knowledge that by those transactions the company was carrying on its business for a fraudulent purpose.”
Key takeaways
This decision underscores the importance of diligence in managing claims involving restored companies as well as highlighting the extended reach of liability for those facilitating fraudulent trading.
Consider Directions on Restoration: Section 1032(3) of the Companies Act 2006 allows a court to give directions or make provision for placing the company in the same position as if the company had not been dissolved. It is not unusual for a company to seek a limitation direction under section 1032(3) where it might be facing limitation difficulties arising during the period when it was dissolved. Consideration should be given at the point of applying to restore the company whether such a direction might be appropriate.
Prompt Action Post-Restoration: Practitioners should act swiftly after a company’s restoration to the register to investigate potential claims thoroughly.
Evidentiary Focus: If relying on Section 32 of the Limitation Act 1980, it is critical to compile comprehensive evidence showing why the fraud could not have been discovered with reasonable diligence during the dissolution period.
Pre-Dissolution Assessment: Proactive steps should be taken to identify possible claims before dissolution to mitigate risks associated with limitation issues.
Review Compliance Procedures: Ensure that robust compliance and due diligence processes are in place when engaging with financially distressed counterparties or transactions that carry fraud risk.
