05 August 2026
Shares for a euro – English Court upholds the integrity of BVI corporate structures against asset stripping attempts Background The decision Practical takeaways
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In a recent decision of the English Commercial court, GLAS SAS (London Branch), as trustee of €250 million in tradeable bonds, succeeded in claims against a BVI-incorporated company and related parties for the misappropriation of shares worth approximately €85 million.
The judgment is a comprehensive illustration of how English courts deploy section 423 of the Insolvency Act 1986 extraterritorially, and of the tort of unlawful means conspiracy, where assets are stripped through offshore vehicles.
GLAS was the trustee of English law bonds with a principal value of €250 million issued by European Topsoho (ETS), a Luxembourg company and indirect subsidiary of the Shandong Ruyi Group, a major Chinese industrial conglomerate. ETS owned approximately 53% of the shares in SMCP, a French fashion company. Some shares were pledged to GLAS as security; the remainder (the Unpledged Shares) had a value of approximately €85 million in October 2021.
GLAS's case was that Ms Qiu, a senior Ruyi Group executive and A Manager of ETS, procured the transfer of the Unpledged Shares to Dynamic Treasure Group Limited, a BVI company she personally controlled, under a purported share sale agreement for €1. Dynamic then converted the shares to bearer form and transferred them to its account with JP Morgan in Singapore.
ETS was subsequently declared bankrupt in Luxembourg. Its court-appointed bankruptcy administrator investigated the transaction independently and reached similar conclusions to GLAS: the transfer was not a genuine commercial arrangement.
The defendants were debarred from defending the claims by reason of persistent non-compliance with court orders, including failures of disclosure across proceedings in England and Singapore. Although debarred, GLAS accepted it had to prove its case on the balance of probabilities.
Governing law. The court held that English law governed both the section 423 claim (as the law of the forum) and the economic torts (under Article 4 of Rome II). The damage occurred in England because GLAS was entitled to call for payment in England under the Trust Deed, and the bonds and trust deed were governed by English law. The court dismissed Xinbo's contention that PRC law applied.
The 2018 Agreement. The court concluded that a purported 2018 pledge agreement (under which Xinbo claimed security over all SMCP Shares) was not genuine and had been created after the event and backdated. Among the numerous difficulties: no contemporaneous documents existed; the B Managers had no knowledge of it; ETS's own managers certified in 2021 that no security existed over the shares other than the bond security; and the arrangement was commercially implausible given the shares were worth €960 million at the purported date versus Shandong Ruyi's supposed debt of €177 million.
The SSA and the Disposal. The purported share sale agreement was held to be invalid. There was evidence that Grandall, Dynamic's corporate director, did not sign the SSA. The transfer lacked the required consent of Sino Power under ETS's Articles, no B Manager co-signed as required, and the €1 consideration was plainly a transaction at a substantial undervalue.
The Beihai Award. A Chinese arbitration award relied upon by the defendants was dismissed as collusive. The arbitral process took place between parties under common control who agreed all substantial points without argument. Xinbo's attempts to enforce it had been dismissed in Singapore and it had abandoned English recognition proceedings.
Section 423 relief. The court granted relief under section 423, holding that the Disposal was a transaction at an undervalue entered into for the purpose of putting assets beyond the reach of GLAS and the bondholders. The court confirmed that section 423 contains no territorial limit and exercised its discretion given the substantial connection with England: the bonds, trust deed, and enforcement mechanisms were all English law instruments.
Unlawful means conspiracy. The c...
The judgment is a comprehensive illustration of how English courts deploy section 423 of the Insolvency Act 1986 extraterritorially, and of the tort of unlawful means conspiracy, where assets are stripped through offshore vehicles.
GLAS was the trustee of English law bonds with a principal value of €250 million issued by European Topsoho (ETS), a Luxembourg company and indirect subsidiary of the Shandong Ruyi Group, a major Chinese industrial conglomerate. ETS owned approximately 53% of the shares in SMCP, a French fashion company. Some shares were pledged to GLAS as security; the remainder (the Unpledged Shares) had a value of approximately €85 million in October 2021.
GLAS's case was that Ms Qiu, a senior Ruyi Group executive and A Manager of ETS, procured the transfer of the Unpledged Shares to Dynamic Treasure Group Limited, a BVI company she personally controlled, under a purported share sale agreement for €1. Dynamic then converted the shares to bearer form and transferred them to its account with JP Morgan in Singapore.
ETS was subsequently declared bankrupt in Luxembourg. Its court-appointed bankruptcy administrator investigated the transaction independently and reached similar conclusions to GLAS: the transfer was not a genuine commercial arrangement.
The defendants were debarred from defending the claims by reason of persistent non-compliance with court orders, including failures of disclosure across proceedings in England and Singapore. Although debarred, GLAS accepted it had to prove its case on the balance of probabilities.
Governing law. The court held that English law governed both the section 423 claim (as the law of the forum) and the economic torts (under Article 4 of Rome II). The damage occurred in England because GLAS was entitled to call for payment in England under the Trust Deed, and the bonds and trust deed were governed by English law. The court dismissed Xinbo's contention that PRC law applied.
The 2018 Agreement. The court concluded that a purported 2018 pledge agreement (under which Xinbo claimed security over all SMCP Shares) was not genuine and had been created after the event and backdated. Among the numerous difficulties: no contemporaneous documents existed; the B Managers had no knowledge of it; ETS's own managers certified in 2021 that no security existed over the shares other than the bond security; and the arrangement was commercially implausible given the shares were worth €960 million at the purported date versus Shandong Ruyi's supposed debt of €177 million.
The SSA and the Disposal. The purported share sale agreement was held to be invalid. There was evidence that Grandall, Dynamic's corporate director, did not sign the SSA. The transfer lacked the required consent of Sino Power under ETS's Articles, no B Manager co-signed as required, and the €1 consideration was plainly a transaction at a substantial undervalue.
The Beihai Award. A Chinese arbitration award relied upon by the defendants was dismissed as collusive. The arbitral process took place between parties under common control who agreed all substantial points without argument. Xinbo's attempts to enforce it had been dismissed in Singapore and it had abandoned English recognition proceedings.
Section 423 relief. The court granted relief under section 423, holding that the Disposal was a transaction at an undervalue entered into for the purpose of putting assets beyond the reach of GLAS and the bondholders. The court confirmed that section 423 contains no territorial limit and exercised its discretion given the substantial connection with England: the bonds, trust deed, and enforcement mechanisms were all English law instruments.
Unlawful means conspiracy. The c...