English Court of Appeal clarifies the scope of the defence to transactions at an undervalue

The case concerns an appeal against a decision dismissing a transaction at an undervalue claim brought by the petitioning creditors of UKCS8 LLC (in liquidation).

Background

Prior to its liquidation, UKCS8 held interests in certain North Sea oil and gas fields. In December 2020, UKCS8's parent sold it to a third party for US$1. Shortly before the sale completed, UKCS8's parent declared a dividend of US$84.7 million in its own favour, extinguishing the debt it owed to UKCS8. 

Decision

The judge at first instance dismissed the claim, holding that the relevant transaction was the overall sale arrangement (of which the dividend was merely an inextricable part), not the dividend alone.

On this basis, the judge found the statutory defence was made out, as the company entered into the transaction:

• in good faith
• for the purpose of carrying on its business 
• there were reasonable grounds for believing the transaction would benefit the company.

The Court of Appeal allowed the appeal, holding that:

• The relevant "transaction" was the dividend alone, as UKCS8 was not a party to the share purchase agreement between its parent and the third party purchaser.
• Any defence must be assessed from the company's perspective as a separate legal entity.
• The dividend was declared solely for the benefit of UKCS8's parent.
• The statutory defence was unavailable as there were no reasonable grounds for believing the dividend would benefit UKCS8.

Key takeaway

When assessing the statutory defence, transactions must be viewed through the lens of the company's interests as a separate legal entity. A dividend paid as part of a broader arrangement will not satisfy the defence where it benefits only the parent company.

Find out more 

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring and Insolvency team.

Taqa Bratani Ltd and other companies v Fujairah Oil and Gas UK Llc (formerly known as Rockrose UKCS8 LLC) and others [2025] EWCA Civ 1669