Preferences/ transactions at an undervalue Flashcards
What is the relevant time for a transaction at an undervalue (bankruptcy) (s339)
5 years prior to pet/ application if insolvent at the time
2 years if not insolvent at the time
Insolvency presumed where associate.
In the case of a transaction at an undervalue, at a time in the period of 5 years ending with the day of the making of the bankruptcy application as a result of which, or (as the case may be) the presentation of the bankruptcy petition on which, the individual is made] bankrupt
That time is not a relevant time for the purposes of sections 339 and 340 unless the individual—
(a) is insolvent at that time (2 - 5 years), or
(b) becomes insolvent in consequence of the transaction or preference;
(Presumed if associate)
What is the relevant time for a preference (bankruptcy)? (s340)
2 years/ 6 months
In the case of a preference which is not a transaction at an undervalue and is given to a person who is an associate of the individual (otherwise than by reason only of being his employee), at a time in the period of 2 years ending with that day, and
in any other case of a preference which is not a transaction at an undervalue, at a time in the period of 6 months ending with that day.
That time is not a relevant time for the purposes of sections 339 and 340 unless the individual—
(a) is insolvent at that time, or
(b) becomes insolvent in consequence of the transaction or preference;
(Presumed if associate)
The court will not make an order under s340 in respect of a preference given to any person unless the individual who gave the preference was influenced in deciding to give it by a DESIRE TO PRODUCE in relation to that person the effect mentioned above.
What is the relevant time for a transaction at an undervalue (liquidation)
2 years for a connected party before onset of insolvency - presentation of petition, notice of intention to appoint etc otherwise date of commencement of winding up.
6 months non connected parties
What is the relevant time for a preference (liquidation)?
2 years for a connected party before onset of insolvency - presentation of petition, notice of intention to appoint etc otherwise date of commencement of winding up.
6 months non connected parties
What is a section 212 IA claim?
Breach of duty or misfeasance
No time limits to claim.
A liquidator, creditor or contributory can apply to court for an order compelling a director to pay compensation for any breach of duty or misfeasance or to make good any loss suffered by the company because of the misapplication of company funds or assets. This provision is commonly used where a liquidator finds evidence that a director has caused loss to the company through allowing it to enter into a preference or transaction at an undervalue, or through negligence.
(Can be against directors or liq, but not administrator, although similar provisions elsewhere for an administrator )
What are the relevance time for s245 claim (Avoidance of floating charges)?
Unless for new consideration:
12 months unconnected persons
2 years - connected persons (no requirement to show insolvency at transaction date)
What is the time limit for extortionate credit claims? (Bankruptcy or liq)
3 years - Same for connected and unconnected parties.
No requirement for insolvency at transaction date.
What is the onset of insolvency in liquidation?
Compulsory liquidation, the presentation of the petition
CVL, the date of the resolution to wind-up the company
What are the criteria for excessive pension payments? (s342)
Whether any of the contributions were made for the purpose of putting assets beyond the reach of creditors
Whether the total amount of any contributions are excessive in view of the individual’s circumstances when those contributions were made
No time limits
What is the criteria for a claim under s423 transactions defrauding creditors?
Actions under s423 can be brought by a trustee, supervisor and creditors. The aim of the provision is to prevent debtors from disposing of assets to the detriment of creditors. Unlike a transaction at an undervalue the legislation does not specify a relevant time limit, therefore it is a useful tool where a transaction at an undervalue claim would fail because it took place outside of the relevant time period. Such actions are however still subject to the usual rules on limitation and may be statute barred after 6 or 12 years depending upon the type of claim. To be successful any applicant for an order under s423 must establish that a transaction at an undervalue has occurred. He must further show that the intent of the debtor in entering into that transaction was to put assets beyond the reach of creditors or to prejudice their interests.
? Same for liq etc?
What is the protection fr third parties against antecedent claims?
Although the court has wide powers to restore assets to the estate where there has been either a transaction at an undervalue, transaction defrauding creditors, or void disposition, those third parties who have dealt with the debtor in good faith (ie for value and without notice of the insolvency/ petition/order) are generally protected. They will not be ordered to restore assets to the estate. When considering value in this context the courts look for valuable consideration which is not necessarily the same as market value. Such third parties are referred to as ‘bona fide purchasers for value without notice’.
What is the definition of associates for s423 claims (transactions defrauding cos)
Spouses and civil partners and former spouses and civil partners
Other relatives
Partners in a partnership
Companies controlled by the debtor/ bankrupt
Some trust relationships.
