Voidable Transactions Flashcards
What is a Connected Person?
- Associates of the Firm.
- Directors, or Associates thereof.
- Shadow Directors, or Associates thereof.
What is an Associate?
- Family.
- Trustees.
- Employees.
- Business Partners.
- Firms Controlled by a Director.
- Firms under the Mutual Control of the Same Entity.
When is the ‘Onset of Insolvency’?
Administration:
- In-Court Procedure: Filing of the Application.
- Out-of-Court Procedure: Notice of Intention to Appoint, or if none, the Appointment itself.
Liquidation:
- Voluntary Liquidation: Passing of Special Resolution.
- Compulsory Liqduiation: Presentation of Petition.
Who can Sue for a Transaction at an Undervalue?
- Liquidator.
- Administrator.
What are the Elements of Transactions at an Undervalue?
Qualifying Transaction:
- The Firm made a Gift or entered into a Transaction where it received significantly less value than it gave.
Insolvency at the Relevant Time:
- The Transaction occured within 2 Years of the Onset of Insolvency.
- The Firm was Insolvent when it Transacted, or become Insolvent as a result thereof.
- Dealings with Connected Persons create a Rebuttable Presumption of Insolvency at the time of Transacting.
What is the Defence to a Claim of Transacting at an Undervalue?
Good Faith and Business Purpose:
- The Firm Transacted in Good Faith and for the purpose of carrying on its Business.
Reasonable Grounds for Benefit:
- At the time, the Firm has reasonable grounds to believe the Transaction would be beneficial.
What are the Remedies for Transacting at an Undervalue?
- The Court can make any Order it deems appropriate to restore the Firm to its prior position.
- Often, this entails compelling the Counterparty to pay the Undervalue to the Liquidator or Administrator.
What are the Limits to Remedies for Transacting at an Undervalue?
- Orders should not Prejudice a Bona Fide Purchaser for Value.
- A Rebuttable Presumption that the Purchaser was not such arises if:
- It was a Connected Person or an Associate; or
- It had Notice of the relevant circumstances.
This also applies to Remedies for Preferential Transactions.
Who can Sue for a Transaction to Defaud Creditors?
- Liquidator.
- Administrator.
- Victim of the Transaction.
What are the Elements of a Transaction to Defraud Creditors?
Transaction at an Undervalue:
- There was a Transaction at an Undervalue.
Intent to Defaud:
- The Transaction was Intended to achieve a Fraudulent Purpose.
- This implies Actual Dishonesty.
The Relevant Time and the Onset of Insolvency are irrelevant for this Offence.
What are the Remedies for Transactions to Defraud Creditors?
The Court can make any Order it deems appropriate to restore the Firm to its prior position.
Who can Sue for a Preferential Transaction?
- Liquidator.
- Administrator.
Regarding Preferential Transactions, what constitutes a Preference?
Qualifying Counterparty:
- The Firms deals opposite a Creditor, Surety, or Guarantor of its Liabilities.
Improved Position:
- The Firm places the Counterparty in better position for Insolvent Liquidation than it otherwise would have enjoyed.
What are the Elements of a Preferential Transaction?
Prefering a Qualifying Counterparty:
- The Firm made a Preference toward a Qualifying Counterparty.
Insolvency at the Relevant Time:
- The Transaction occured within 6 Months prior to the Onset of Insolvency, or 2 Years prior if the Counterparty is a Connected Person.
- The Firm was Insolvent when it Transacted, or become Insolvent as a result thereof.
Desire to Prefer the Counterparty:
- The Firm positively wished to put the Counterparty in a better position for Insolvent Liquidation, beyond a response to genuine commercial pressure.
- Dealings with Connected Persons create a Rebuttable Presumption of Preference.
What is the Defence to a Claim of Preferential Transacting?
Proving the absence of a desire to Prefer the Counterparty.
