Jurisdiction(s):
United Kingdom

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Key definition

Validation order definition

What does Validation order mean? A validation order is a court order authorising (in advance) or confirming (after the event) a transfer, payment or other dealing with a debtor’s property that would otherwise be void because it occurs after presentation of a winding‑up or bankruptcy petition, or after the commencement of a compulsory winding up. The expression is not a defined statutory term. It reflects legislation that renders post‑petition dispositions void “unless the court otherwise orders” (for example, under the Insolvency Act 1986 and corresponding Northern Ireland provisions; in Ireland, the Companies Act 2014 and the Bankruptcy Act 1988), and is grounded in case law...

Validation orders for post-petition dispositions: when to apply, procedure, evidence and court criteria under the Insolvency Act 1986, section 127 (England and Wales)

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Practice notes

This Practice Note explains when a validation order should be sought and sets out the steps to be taken.

Why might an application for a validation order need to be made?

Under section 127 of the insolvency Act 1986 (IA 1986), any disposition of a company’s property after the start of a winding up is void.

Examples of dispositions include:

payments from a bank account; on learning of a winding-up petition, a bank will often freeze the account, preventing trading
payment of wages, salaries and other routine day-to-day expenditure by the company
disposal of a company asset, for example a land transaction

Whether or not the disposition is at full market value is immaterial: it may still fall within IA 1986, s 127.

Although IA 1986, s 127 renders void dispositions of the company’s property after winding up has commenced, this does not extend to dispositions made by a receiver of property within the relevant charge...

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