Section 423 in focus: The Credit Suisse & Greensill saga unravelled

Aspiring commercial barrister and BPC graduate Radha Shivam explains this complex case and the key legal point it hinges on

Credit Suisse Virtuoso SICAV-SIF and another v SoftBank and others is a complex, high-profile dispute involving major players and a long history, with plenty to unravel both financially and legally.

Given its once-strong presence, Credit Suisse needs little introduction. However, following a series of unfortunate events, it faced significant difficulties and was taken over by rival Swiss bank UBS in 2023. This case partly stems from those events. The litigation centres on a claim under section 423 of the Insolvency Act 1986 and is linked to the collapse of the Greensill Group—an event that continues to attract attention today.

There are several defendants involved — in fact, the seventh defendants are Greensill Liquidators. The claim is valued at $440m and Credit Suisse alleges this sum is owed to its customers by Katerra, which filed for bankruptcy in 2021. Kattera was a US company and funded by Greensill, but pertinent to this case, it was backed by SoftBank.

A brief background of Greensill

You may remember the name Greensill scattered over headlines a few years ago, particularly in relation to David Cameron, but how did the company operate and collapse?

According to the Financial Times, Greensill Capital (“Greensill”) often depicted itself as a “saviour” of SMEs. In fact, it often claimed to be “making finance fairer” and “democratising capital”. The reputation that the company had created was often admired, to the extent that in 2017, the King (then Prince of Wales) presented the owner with the honour of a CBE for his services to the economy. This reputation continued and in 2018, former prime minister, David Cameron, became an adviser to Greensill. The company had many investments flowing into it, as investors appeared to be “bewitched by its financial engineering”. In 2019, SoftBank’s Vision Fund poured a staggering $1.5 billion into the company.

So, what went wrong?

Essentially, Greensill’s business model was supply chain finance. The company lent money to other companies by buying their invoices. On a basic level, this means that a financial intermediary, in this case Greensill, provides the financing for a buyer to pay their supplier.

The buyer may be struggling or incapable of paying their invoice(s) by the due date and so would benefit from a company like Greensill to pay on their behalf. In order to maintain their competitive advantage in the highly competitive loans industry, Greensill offered longer repayment terms to attract clientele.

Greensill achieved this financing by packaging invoices as securitised loans and then sold these onto financial institutions, such as Credit Suisse. However, this is a highly risky business model and eventually, Greensill collapsed after their insurers withdrew cover. This critical cover was withdrawn amid concern that the company was significantly exposed to the steel and commodities business, GFG Alliance (“GFG”), owned by the tycoon, Sanjeev Gupta.

Eventually, Greensill were unable to meet their financial liabilities and filed for administration in early 2021. Notably, they were unable to repay their $140 million loan to Credit Suisse. Greensill was tackling a serious lack of liquidity. Credit Suisse were funding Greensill’s operations and wanted to be repaid. However, Greensill had no plausible way of doing so, as their portfolio had a clear overexposure to clients who were defaulting on payments themselves.

GFG, mentioned above, defaulted on $5 billion worth of loans and needed Greensill to provide them with the crucial working capital that they needed, otherwise they would likely collapse into insolvency. GFG was using this funding to finance transactions between ‘related parties’, which only increased the risk of default. When Greensill lost their insurance cover, they were unable to renew a $4.6 billion contract and Credit Suisse froze $10 billion in funding. Thus, there was a dramatic reduction in liquidity and investor trust lined up for Greensill.

In March 2021, lawyers acting for Greensill argued (in Australia) that the company’s insurers should be ordered to extend their insurance policies which were set to expire imminently. This insurance extension that Greensill was seeking was crucial, and it was to back several billion dollars that it was owed by businesses around the globe. If this was not possible, 50,000 jobs would be at risk.

However, the company had waited too long to bring the matter to court. A week later, Greensill had only one option left and filed for bankruptcy in London. As the New York Times stated, “Greensill’s dazzlingly fast failure is one of the most spectacular collapses of a global finance firm”.

This event, plus many more issues, billion dollar losses and significant management changes, eventually had a knock-on effect on Credit Suisse, and led to UBS taking over this former leading financial firm in 2023. Credit Suisse had to sell their shares, a process which began in 2021. This was triggered by losses relating to the collapse of Archegos, an investment fund, and Greensill.

As one of thirty systemically important banks globally, Credit Suisse’s failure would cause a significant ripple effect. UBS’s takeover was structured as a £2.65 bullion all-share merger. This merger was a major event and was expedited by the Swiss government. The government exercised its emergency powers, removing the requirement for shareholder approval, with a view to avoiding any further problems.

Right, that was some financial background. Now for some legal analysis — stay with me.

What is Section 423 of the Insolvency Act 1986 and the important case of <em>El-Husseiny & another v Invest Bank PSC?

Section 423 is an important piece of the puzzle. As stated at the start of this article, the ongoing case of Credit Suisse focuses on a claim under this section.

Section 423 cannot be discussed in this context without also discussing the landmark Supreme Court judgment of El-Husseiny & another v Invest Bank PSC [2025] UKSC 4, handed down in February 2025. This case discussed the scope of section 423, and as the Supreme Court described it, is an “important” point on the interpretation of section 423. These arguments are likely to come up in the litigation of Credit Suisse as well.

This section relates to transactions defrauding creditors and specifically, transactions entered into at an undervalue. It allows creditors to seek the reversal of transactions entered into by debtors, essentially putting assets out of reach or otherwise causing prejudice to creditors.

The issue in El-Husseiny was whether the scope of section 423 was limited to transactions involving assets beneficially owned by the debtor, or whether it extended to transactions involving other assets not owned by the debtor, but due to the way they were dealt with, would impact the value of assets beneficially owned. In El-Husseiny, the issue was that the debtor caused companies, in which he was the shareholder, to enter into transactions involving the transfer of assets owned by the company at an undervalue.

In Abu Dhabi, Invest Bank PSC (“the Bank”) secured judgment against Mr El-Husseiny for c.£20 million. The Bank sought to enforce the judgment against his UK assets, including properties in London and the companies which owned them. It was alleged, amongst others, that Mr El-Husseiny arranged for these assets to be transferred beyond the reach of the Bank.

A key property was 9 Hyde Park, worth around £4.5 million by Marquee Holdings Limited (“the company”). Mr El-Husseiny was the beneficial owner of all shares in the company at the time of the transfer. He had arranged for the legal and beneficial title of 9 Hyde Park to be transferred to his son. Crucially, this was for no consideration. Eventually, the company was deprived of its only asset — the value of Mr El-Husseiny’s shares. Over time, the company was reduced to such a degree that the bank was facing serious difficulty in enforcing judgment against him.

The Supreme Court considered that section 423(1) and the broad definition of “transaction” in section 436(1), meant that the Company’s disposal would fall within section 423(1). The court considered Mr El-Husseiny’s submissions under three headings – textual indicators (the wording of sections 423-425), the purpose of section 423, and the interrelationship of many other sections. The Supreme Court found that the wording of section 423 is sufficiently wide to apply in this context, i.e. when a debtor causes their company to transfer assets at an undervalue, resulting in the diminution in value of the debtor’s shares.

The Supreme Court’s judgment upholds the Court of Appeal’s decision, but the former’s reasoning is much broader. Often a source of contention due to interpretation arguments, this case is said to be of great interest to civil fraud, asset recovery, and insolvency practitioners, in resolving such arguments relating to section 423.

This judgment confirms that section 423 applies where a debtor gains from a transaction that will be detrimental to creditors. This reinforces certainty for creditors and re-affirms the commercial approach taken towards insolvency by English law.

What does this mean going forward?

It is likely that many of these legal interpretations regarding section 423, El-Husseiny, and the complex financial aspects intertwined, will be interesting points of discussion during the ongoing case of Credit Suisse.

This case is expected to bring to light novel legal points, which will no doubt continue to be followed with curiosity by legal practitioners and will likely be referenced in future high-profile insolvency, finance-related and commercial cases.

Radha Shivam is an aspiring commercial barrister, currently an unregistered barrister and Mentor at The University of Law. She has a wealth of experience and holds a strong interest in commercial litigation, banking & finance, and restructuring & insolvency law. She is a LLB (Hons) Law with International Business and BPC graduate, and is an Inner Temple Scholar.

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