The Court of Appeal’s recent judgment in TAQA Bratani Limited [2025] EWCA Civ 1669 (“TAQA”) has reshaped the risk landscape for directors operating within corporate group structures, particularly complex ones.

Published: 22 April 2026
Authors: Lauren Moroney

The Court of Appeal’s recent judgment in TAQA Bratani Limited [2025] EWCA Civ 1669 (“TAQA”) has reshaped the risk landscape for directors operating within corporate group structures, particularly complex ones. While the case arose in the context of transactions at an undervalue, governed by s.238 of the Insolvency Act 1986 (“IA 1986”), the implications of the judgment stretch far beyond distressed companies.

For directors, particularly of large corporates, and especially those who also act as nominee directors for group subsidiaries, TAQA should prompt a re-assessment of the approach to intra-group transactions.

The 238(5) defence

Under Section 238(5) IA 1986, if company directors can satisfy the court that they entered into a transaction at an undervalue a) in good faith and for the purpose of carrying on business, and b) that at the time of the transaction there were reasonable grounds for believing the transaction would benefit the company, then they will avoid an order against them.

The TAQA judgment has narrowed the operation of the s.238(5) defence. The Court of Appeal made it clear that generalised reference to and reliance on, for example, wider group strategy, commercial purpose, or overall deal rationale, will no longer satisfy the test.

Instead, directors must show that each step was for the benefit of the company itself, not merely advantageous to the parent company or the group as a whole. This significantly reduces the room for manoeuvre when defending value movements within a corporate structure.

Single steps can be the “transaction”

TAQA confirmed that, for the purposes of s.238, a single step within a multi‑stage matter can itself comprise the relevant “transaction”. Even if a transfer or restructuring move is embedded within a much larger commercial deal, that broader context will not necessarily save an individual component that strips value from a company.

In essence: every step matters. Directors must be able to justify that each discrete stage of a deal benefits the company on a standalone basis. If one step disadvantages a company, directors can no longer rely on the fact that it sits within an otherwise coherent or beneficial wider transaction. TAQA represents a significant tightening of the analytical lens applied to intra‑group arrangements.

Particular steps directors should be mindful of include, among other things: intra‑group transfers of assets, assumption of liabilities for group benefit, dividend payments supporting deal execution, and steps taken as part of broader restructurings.

Why TAQA matters for directors of large corporates

In reality, most major corporates are unlikely to suffer an insolvency event. However, that is not the real point here. Many large corporations have extensive subsidiary networks, including dormant entities, special‑purpose subsidiaries and newly acquired businesses. It is entirely foreseeable that one of these smaller, sometimes insufficiently monitored, subsidiaries could slip into financial difficulty long before the parent company ever would, and this is precisely where the risk emerges.

If you are a director of a major corporate and you also act as a nominee director on its subsidiaries, following the TAQA ruling, you must ensure particular care is taken and the subsidiary in question is the focus of your decision-making.

Nominee directors often find themselves slightly detached from day‑to‑day operations of smaller subsidiaries, and therefore easily slip into the mindset of assuming that any value transfers within the group are innocuous because it benefits the parent company or is part of a wider deal – post TAQA, that mindset is no longer safe.

The danger zone for nominee directors

The TAQA judgment provides a clear warning: directors cannot take their eyes off the ball simply because an entity is small or non‑core. If a subsidiary becomes insolvent, office‑holders (and the court, should matters proceed to litigation) will examine historic transactions at an undervalue with renewed strictness in light of TAQA.

If one discrete step left the subsidiary worse off, the fact that it advanced a broader corporate strategy is no longer a viable defence, and directors who authorised any such step will face far greater scrutiny of their decision‑making.

A renewed governance focus

For large corporates with extensive group structures, TAQA should prompt a renewed governance focus. The safest path should involve:

• documenting the entity‑specific benefit of each step and maintaining careful records evidencing independent judgment at subsidiary level
• ensuring nominee directors genuinely understand what is happening within their subsidiaries (and that it is happening for the benefit of the subsidiary)
• avoiding reliance on implicit group benefit or assumed alignment of interests.

The key takeaway is that TAQA reinforces that each company is its own legal person and must be treated as such by directors – especially when value flows across the corporate structure.