Understanding the limitations of sections 235 and 236 of the Insolvency Act 1986

Historically, sections 235 and 236 of the Insolvency Act 1986 (IA 1986) have allowed office holders to cast a wide and seemingly unrestricted net in obtaining company documents and information.

The extensive investigative powers contained in these provisions provide a valuable mechanism for office holders to seek the disclosure or delivery of a near-exhaustive list of books, records and property owned by insolvent entities.

The production of such information enables office holders (such as liquidators and administrators) to fully investigate, uncover and assess the company’s true financial position and the circumstances leading to its winding-up. This further facilitates the ability to identify any antecedent transactions or misfeasance claims worth pursuing.

Despite these powers being wide-ranging, they are not without limitation. This was seen in the case of Webb v Eversholt Rail Limited [2024], where ICCJ Burton dismissed the liquidators’ application pursuant to sections 235 and 236 of the IA 1986 on the basis that it was “fundamentally misconceived”, largely due to their failure to show that the documents sought were reasonably required.

This decision has recently been upheld on appeal by Sir Anthony Mann, sitting as a high court judge, who reaffirmed the need for liquidators to satisfy the requirement of reasonableness.

The Webb case

The case involved an application by the liquidators of Eversholt Rail (365) Ltd, made under sections 235 and 236 of the IA 1986, for the production of documents held by its sister company, Eversholt Rail Ltd, and its legal representatives Norton Rose Fulbright LLP. Both companies formed part of the wider Eversholt UK Rail Group.

The liquidators framed their application in broad terms, seeking delivery of a large body of documents described by the judge as “unlimited by time or any other factor”. Counsel for the liquidators argued that they were entitled to this extensive range of documents – referred to as “everything forever” – for the purpose of “reconstituting the company’s knowledge”.

In rejecting this argument, the judge noted that while these provisions permit reconstitution to an appropriate extent, they do not entitle office holders to submit blanket requests for all conceivable information relating a company. The desire to reconstitute company knowledge, as a standalone justification, was therefore deemed insufficient.

The court reiterated the need for office holders to establish a reasonable requirement for the information sought. Although this requirement is expressly stated in section 235, it applies equally to section 236.

In interpreting this, the judge relied on the earlier case of British & Commonwealth Holdings plc v Spicer & Oppenheim [1993], which described the need to balance disclosure – so office holders can perform their duties – with the potential oppression suffered by the disclosing party. In summary, the judge endorsed the first-instance position, confirming that office holders are not entitled “as of right” to all company information, and must demonstrate a reasonable requirement for the documents requested.

Conclusion

The decision of Sir Anthony Mann to uphold ICCJ Burton’s dismissal should be regarded as a cautionary note for office holders and insolvency professionals relying on sections 235 and 236 of the IA 1986.

While these provisions remain invaluable tools for obtaining crucial documents and information relating to an insolvent entity, they are not a ‘catch-all’ mechanisms granting an automatic right to request an unlimited body of company documents without appropriate justification.

To avoid similar outcomes, requests under section 235 and 236 should clearly define the class of documents or information sought with sufficient specificity. Importantly, applications must also demonstrate that the documents or information are reasonably required by the office holder, considering both their duties and the need to avoid causing unreasonable oppression to the disclosing party.