Sections 235 and 236 Insolvency Act 1986: Directors’ Duties to Co-operate with Liquidators

Sections 235 and 236 of the Insolvency Act 1986 form the backbone of an insolvency office-holder’s investigative powers once a company enters formal insolvency proceedings. Section 235 creates a statutory duty to co-operate, requiring directors and others connected to the company to provide information, documents, and assistance reasonably required by the liquidator or administrator. Section 236 empowers the court to summon individuals for examination on oath and compel the production of documents. These provisions are frequently engaged following the presentation of a winding-up petition, the appointment of administrators, or in asset recovery investigations. Directors who fail to comply risk sanctions, cost orders, and potential disqualification proceedings. Understanding the scope and limits of these powers is essential, particularly in the context of modern insolvency litigation and HMRC-led investigations. For authoritative advice and legal representation, directors often instruct specialist insolvency firms such as LEXLAW.

What Are Sections 235 and 236?

Sections 235 and 236 of the Insolvency Act 1986 operate together but serve distinct functions within insolvency investigations.

Section 235 imposes a positive duty on a defined category of persons, including present and former officers of the company, employees, promoters, and anyone who has taken part in its formation or management, to co-operate with the insolvency office-holder. That duty includes providing information concerning the company’s affairs, attending meetings, and delivering up books, records, and property as “reasonably required.”

The statutory wording is deliberate. The obligation is not unlimited. It is confined to what is reasonably required for the office-holder to carry out statutory functions, such as identifying assets, investigating potential misfeasance, or reporting on director conduct.

Section 236 goes further. It grants the court power to summon before it:

• Officers and former officers;
• Persons known or suspected to have company property;
• Any person capable of giving information concerning the company’s promotion, formation, business, dealings, affairs, or property.

Under s.236, the court may order production of documents or conduct examinations on oath. These proceedings often occur in the Insolvency and Companies Court (ICC) or High Court. Importantly, these provisions effectively “pierce the corporate veil” in the sense that individuals cannot hide behind the separate legal personality of the company to avoid scrutiny. However, they do not override legal professional privilege or fundamental procedural safeguards.

In practice, s.235 is commonly used in the early stages of liquidation to obtain cooperation voluntarily. If resistance or evasion occurs, s.236 enables escalation via a court application. Directors must appreciate the risks involved and instruct insolvency experts at the earliest opportunity.

Who is Affected and When These Sections Apply?

The scope of these sections is wide. Directors, both current and former, are the most frequently affected. However, shadow directors, de facto directors, company secretaries, senior managers, accountants, and even family members holding company property may fall within their reach.

Third parties can also be targeted under s.236. Banks, solicitors, group companies, and professional advisers have all been subject to court-ordered disclosure applications where they possess information relevant to the insolvent company’s affairs.

These powers arise only after formal insolvency proceedings commence. Typical triggers include:

• Compulsory liquidation following a winding-up petition;
• Creditors’ Voluntary Liquidation (CVL);
• Members’ Voluntary Liquidation (MVL) where issues later arise;
• Administration appointments;
• The appointment of a provisional liquidator.

Directors facing a petition frequently seek urgent assistance from specialists to prevent the situation escalating into full liquidation, where s.235 and s.236 powers become immediately relevant.

Recent High Court decisions demonstrate judicial concern about overreach. Courts have shown willingness to limit wide-ranging applications that resemble fishing expeditions rather than targeted investigations.

Case Law and Enforcement Trends

Limits on Liquidator Disclosure Requests

A significant 2026 decision, Webb v Eversholt Rail Limited [2026] EWHC 101 (Ch), upheld an ICC Judge’s refusal of a liquidator’s application seeking disclosure described as “everything forever.”

The High Court confirmed that office-holders must demonstrate that requested information is “reasonably required.” Sir Anthony Mann rejected the proposition that liquidators could demand wholesale reconstruction of a company’s knowledge base without evidencing specific investigative need.

He observed that while the purpose of sections 235 and 236 includes reconstituting corporate knowledge, that purpose alone does not justify unlimited disclosure. The court emphasised proportionality and evidential support.

This decision reinforces that liquidators must particularise their requests and explain how documents relate to defined lines of inquiry.

Evidence Thresholds for Court Orders

The court has previously held that s.236 should not be used oppressively or as a substitute for ordinary disclosure in anticipated litigation.

Judges assess:

• Whether the material sought relates to identifiable issues;
• Whether the request is proportionate;
• Whether alternative mechanisms exist;
• The burden placed on the respondent.

The courts have repeatedly stressed that s.236 is not a licence for speculative exploration. As stated in earlier authority, the power must be exercised “judicially and not oppressively.”

In 2024 and 2025, the Insolvency and Companies Court continued to scrutinise applications carefully, especially where third parties are involved. Applications against professional advisers often attract close analysis due to privilege concerns.

Consequences of Non-Compliance

Failure to comply with s.235 can result in court enforcement, including fines and daily default penalties. Persistent refusal may expose directors to adverse costs orders or findings of misconduct. Where a court order is made under s.236, non-compliance may amount to contempt of court, a serious matter that can lead to fines or imprisonment.

Beyond immediate sanctions, non-cooperation often influences liquidator reports to the Secretary of State. Such reports may form the basis of director disqualification proceedings. Directors should understand that obstruction, delay, or incomplete disclosure can be portrayed as evidence of unfitness.

There is also a litigation risk. Information uncovered during s.235 or s.236 processes may underpin misfeasance claims, wrongful trading actions, or professional negligence allegations. Engaging experienced advisers early can mitigate these risks. At LEXLAW, our insolvency litigators regularly challenge disproportionate requests and negotiate narrowed scopes to protect directors from oppressive tactics.

Defending or Limiting Section 235 & 236 Requests

Directors are not without protection. The statutory phrase “reasonably required” provides a critical safeguard. A recipient may argue reasonable excuse, for example, lack of possession of documents, genuine inability to comply within timeframes, or disproportionate burden. Legal professional privilege remains inviolable and must be asserted carefully.

Where requests are vague or overbroad, it is open to respondents to seek clarification, negotiate scope, or resist via court application. The courts increasingly expect office-holders to define investigation categories clearly.

Strategic engagement often prevents escalation. In other cases, formal challenge is necessary to prevent misuse. Such matters are best left to insolvency experts well-versed in the legal steps to take which best protect the directors’ position.

Implications for Directors and Businesses

Post-pandemic enforcement has intensified. Government focus on “phoenixism,” bounce-back loan misuse, and tax arrears recovery has led to more assertive investigations.

HMRC, often the largest unsecured creditor, actively supports liquidators pursuing directors for recovery actions. Section 235 and 236 requests frequently precede claims for wrongful trading or breach of duty. There can also be interplay with confiscation regimes under the Proceeds of Crime Act 2002 (POCA), particularly where fraud allegations arise.

Non-payment of court-imposed penalties may lead to civil enforcement measures, including charging orders or bankruptcy proceedings. Directors must therefore treat information requests as legally significant events, not administrative inconveniences.

Practical Steps for Directors

Upon receiving a s.235 request, directors should first review the scope carefully. Determine precisely what is sought, over what period, and for what stated purpose. Document your position regarding possession and accessibility of requested materials. If compliance presents practical difficulties, record the reasons contemporaneously.

Seek specialist legal review promptly. Early intervention can prevent inadvertent admissions or waiver of privilege. Where appropriate, solicitors can request clarification, negotiate staged disclosure, or advise on proportionality arguments.

If a s.236 application is threatened or issued, urgent representation in the court may be necessary. Acting swiftly can significantly influence judicial perception and outcome.

Instruct Expert London Insolvency Lawyers

Insolvency investigations demand both technical expertise and strategic judgment. LEXLAW is recognised for its dual-qualified team combining solicitor and barrister advocacy experience in complex insolvency litigation.

Our lawyers regularly appear in the Insolvency and Companies Court, defending directors against expansive disclosure demands and resisting disqualification proceedings. We are particularly experienced in urgent winding-up scenarios and contested liquidations.

Through collaboration with specialists, we deliver integrated defence strategies addressing insolvency, tax, and regulatory exposure. Directors facing Section 235 or 236 demands are encouraged to seek early advice. Initial consultations are necessary to assess risk and strategy. Contact now for urgent advice!