The Insolvency Act, Section by Section | Part 2 | Section 207
Can a transfer made years ago come back as a criminal charge?
For directors whose companies gave away, transferred or charged property in the years before liquidation.
Section 207 in plain English
Section 206 dealt with hiding what the company still has. Section 207 deals with giving it away. It is the criminal provision aimed at company property that was gifted, transferred or charged before liquidation, and its memory is long: transactions up to five years before the winding up began are within its reach.
Like its neighbour, the section only comes alive once the company is being wound up. At that point, a past or present officer commits an offence under one of two limbs.
Gifts, transfers and charges
Making or causing any gift or transfer of the company’s property, granting any charge over it, or causing or conniving at execution being levied against it.
Concealment around a judgment
Concealing or removing company property after a money judgment against the company goes unsatisfied, or in the two months before that judgment was obtained.
The two clocks of section 207
Each limb measures time from a different anchor point.
Limb one | measured from the winding upWho the section catches
The offence belongs to officers of the company, past and present. Resignation before the winding up offers no shelter, because the section asks when the transaction happened, and who caused it, rather than who was still on the register when the petition arrived. Directors who arranged transfers through intermediaries are caught by the causing and conniving language, which reaches conduct done through others as readily as conduct done directly.
What has to be proved, and by whom
The architecture of proof mirrors section 206, and once again the striking feature is where the burden sits. The prosecution establishes the transaction. The escape routes then belong to the defence, and there are two.
A gift, transfer or charge over company property, or concealment or removal around an unsatisfied judgment.
Conduct more than five years before the winding up began sits outside the section altogether.
Inside the five years, it falls to the accused to prove they had no intent to defraud the company’s creditors.
A transaction at proper value, documented at the time, with a genuine commercial reason, defeats the charge.
A gift to a connected person while creditors went unpaid, with nothing on paper, leaves the accusation standing.
The practical consequence is the same one that runs through the whole of Chapter X. The evidence that wins these cases is made at the time of the transaction, in valuations, minutes and correspondence, long before anyone contemplates a courtroom.
What a conviction costs
Section 207 is a criminal offence triable in either court, carrying a custodial maximum and an unlimited fine on indictment. As with section 206, the conviction is only part of the damage, because the transaction itself remains exposed to the civil machinery of the Act.
Transfers designed to strip value ahead of a liquidation attract custody in the serious cases.
A conviction connected with the management of a company opens the way to a lengthy disqualification.
Liquidators can apply to set aside undervalue transactions and transfers made to defeat creditors. The asset comes back regardless of the criminal outcome.
Family members, connected companies and associates who took the property can be ordered to restore it or its value.
How a transaction is explained the first time it is raised often decides whether it becomes a claim. Femi has spent thirty years on both sides of these inquiries, inside HMRC and advising clients across tax and insolvency.
Book a Free 30 Minute CallThe defence, and the conduct that keeps a transaction safe
The statutory defence is proof of an honest state of mind at the time of the transaction, so the work of the defence is really the work of the paper trail. A transaction that was safe when it was made stays defensible five years later only if the reasons for it survive on paper.
What a defensible transaction looks like
- Full value changed hands, supported by an independent valuation or market evidence kept on file.
- The commercial reason for the transfer or charge was recorded when it happened, in a minute or a note.
- The company’s solvency position at the time was documented, with accounts or a cash-flow snapshot.
- Transfers to connected people or companies were handled with more formality, never less.
- Nothing moved after a judgment was entered, or once one was clearly coming, without advice first.
- Professional advice on anything unusual was taken in writing and retained.
The HMRC angle
Limb two of section 207 turns on an unsatisfied money judgment against the company, and in the real world of struggling companies, the judgment creditor is very often HMRC. Unpaid VAT and PAYE crystallise into enforceable debts, and once enforcement begins, any movement of company property comes under a spotlight that HMRC is uniquely equipped to shine.
Charges granted over company assets are public at Companies House, dated and visible.
Transfers of land and vehicles leave dated entries that map directly onto the section’s time limits.
HMRC can reach bank records and third parties, putting payments to connected people in plain view.
Femi’s practice sits directly on this ground. Eight years inside HMRC, fifteen years representing clients as a tax adviser at KPMG, Deloitte and Grant Thornton, and a further fifteen years as a solicitor acting for clients in the insolvency space. When a liquidator or HMRC first raises a historic transaction, the quality of the explanation given at that early stage usually determines whether the matter becomes a settlement, a civil claim or a referral.
A worked example
Take a composite scenario, drawn from common patterns rather than any client matter. Two companies each own a small freehold industrial unit. Both fall behind with VAT, and in both cases HMRC obtains judgment. The directors respond very differently.
Moves the unit sideways
- Six weeks after HMRC’s judgment, the freehold unit is transferred to a new company owned by the director’s spouse.
- The stated price is a pound. No valuation, no minute, no explanation on file.
- The company enters compulsory liquidation eight months later.
- The Land Registry entry dates the transfer squarely inside the section’s reach.
- The burden of proving no intent to defraud creditors is his, with an empty file.
- Criminal exposure under section 207, and the liquidator moves to unwind the transfer against the spouse’s company.
Sells and shows the working
- The unit is put on the open market through an agent.
- It sells at a price supported by a written valuation obtained first.
- The proceeds go into the company account and toward the judgment debt.
- A board minute records the decision and the reason.
- The company still fails, and the liquidator reviews the sale.
- The paper trail answers every question. No realistic section 207 exposure.
Related sections and where to go next
Section 207 works alongside its neighbours. Section 206, fraud in anticipation of winding up, covers concealment and removal in the final twelve months and is the natural companion piece to this one. Section 208 moves the focus to conduct during the winding up itself, and section 209 deals with falsified books. Each has its own article as Part 1 of this series continues. On the civil side, the provisions that unwind undervalue transactions and transfers made to defeat creditors run in parallel with section 207, and they will get their own treatment when this series is extended.
If a winding-up petition or a liquidator’s inquiry is already part of your situation, the practical guides in The Director’s Insolvency Survival Guide cover the urgent ground, including what happens when directors come under investigation.
And if a transaction from the company’s past is starting to attract questions, the time to shape the explanation is now, while it is still an inquiry.
A confidential 30 minute call with Femi O. Ogunshakin, Solicitor, Tax Adviser and Former HMRC Inspector.
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