Company: Claw Back of Assets Flashcards

1
Q

Who can investigate a companies or individuals actions prior to insolvency?

A
  • liquidator
  • administrator
  • trustee in bankruptcy
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2
Q

What are the types of transactions that can be set aside?

A

Preference
- intentionally putting creditor in better position on liquidation

Transaction at undervalue
- property gifted or sold at under value

Fraudulent Trading
- carrying on business of company with intent to defraud creditors

Wrongful trading
- director carries on business when they know/ought to know company has no reasonably prospect of avoiding insolvency

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3
Q

What are the requirements for preference?

A

Action to put them in better position
- granting security on existing loan

Intention
- intention to prefer the creditor
- assumed if connected person

Time
- within 6 months of onset of insolvency
- 2 years if connected person

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4
Q

When is the onset of insolvency? (liquidation, administration and bankruptcy)

A

Company Compulsory Liquidation
- date of presentation of petition

Voluntary Liquidation
- date it enters liquidation

Administration (earlier of two)
- files notice of Intention to Appoint Administrator; or
- date it entered administration

Individuals
- presentation of bankruptcy petition

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5
Q

What effect does preference have?

A

Transaction voidable at discretion of court. Can order:
- any property be returned
- any proceeds of sale be returned
- any security discharged

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6
Q

Requirements for transaction at an undervalue (Companies)?

A

Property that would have been part of bankrupt estate
- gifted or sold at undervalue

Time
- within 2 years of company insolvency

Insolvency requirement
- must have been insolvent at time of transactions; or
- become insolvent as a result of transaction
- presumed insolvent if to connected person

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7
Q

Transaction at undervalue (individuals)?

A

Property that would have been part of bankrupt estate
- gifted or sold at undervalue

Time
- within 5 years individuals bankruptcy

Insolvency Requirements
- presumed if made within 2 years of bankruptcy petition
- presumed if to connected person
- if between 5-2 years then must show was bankrupt/became bankrupt due to transaction

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8
Q

What is the effect of a Transaction at undervalue?

A

Transaction voidable at discretion of court. Can order:
- any property be returned
- any proceeds of sale be returned

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9
Q

Is there a defence to transactions at undervalue?

A

Company
- transaction was entered in good faith;
- for purpose of carrying on business; and
- when it was made there were reasonably grounds for believing it would benefit company

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10
Q

Is granting a security a transaction at undervalue?

A

No - but may be preference

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11
Q

What is required for fraudulent trading?

A

Director or any other person

Carries on business of company

With intent to defraud creditors

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12
Q

What are the consequences of fraudulent trading?

A

Liable for personal contributions to companies assets as court orders

also criminal offence

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13
Q

Requirements for Wrongful Trading?

A

Directors know of ought to know insolvency is unavoidable

Fail to take adequate steps to minimise loss to creditors

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14
Q

What are the consequences of wrongful trading?

A

Court may order directors to contribute to companies assets as the court deems appropriate

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15
Q

Is there a defence to wrongful trading?

A

If directors shows:
- they took every step with view to minimising losses to creditors after becoming aware that liquidation was unavoidable

  • should at least have taken professional advice
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16
Q

What is the relevance to floating charges in claw back?

A

May be voidable as presence but can also be automatically void

If created:
- for no consideration

  • within 12 months ending with onset of insolvency
  • 2 years if to connected person
  • at time company was insolvent or became insolvent as a result
  • presumed if connected person