Claw-back law shake-up – today’s Supreme Court decision

The Supreme Court has today released a decision which will have major implications for many businesses that have traded with insolvent companies.

The Supreme Court has said that where an innocent party gives value at any time to a company that then failed, the innocent party will have a defence to a request of a liquidator for the repayment of sums paid to the innocent company. Previously the liquidator could claw back payments made to the innocent business for up to two years prior to the company going under.

This will be seen as a relief for many small businesses that can suffer significant harm when being asked to re-pay sums already received and spent by them.

However, it is necessary that the innocent business is acting in good faith and is not aware of the insolvency of the company – often this is a difficult hurdle to get over.

We will provide a further more detailed update once we have digested the decision in more detail.