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‘Antecedent’ means to go before in time. Antecedent transactions are those which a company enters into prior to its insolvency which may be open to challenge by the Liquidator or Administrator after the company enters an insolvency process. Examples of such transactions are transactions at an undervalue and preferences.
In order to prove that an antecedent transaction has taken place, the Insolvency Act 1986 will set out statutory steps to prove them. One of those steps will be that the transaction took place within an ‘anterior period’ counting back from the commencement of winding-up, Bankruptcy or Administration.
An officeholder will choose to pursue an antecedent transaction because it is their duty to take in the property of the insolvent estate, sell it and maximise the realisations to creditors. If the directors, or other persons, have acted wrongly prior to the commencement of the insolvency intervention, the officeholder can choose to pursue them for their previous transactions to seek a remedy that will be paid into the estate, so augmenting the fund available for creditors.
However, pursuing such transactions can be expensive and, even if the action is proven, the director, etc. may not be worth pursuing. It is a careful calculation that needs to be made by the officeholder, balancing the cost of the investigation and potential action versus the possible reward for the creditors.
(See also ‘voidable transactions’.)
[See ‘Liquidator’, ‘Administrator’, ‘Insolvency Act’, ‘Transaction at an Undervalue’, ‘Preference’, ‘Officeholder’ and ‘Bankruptcy’.]
An anterior period in an insolvency and restructuring context quite literally means ‘counting back from the date of …’ the commencement of Liquidation/ Administration or the Bankruptcy Order. The term ‘relevant time’ is also used in this context.
When investigating antecedent transactions the officeholder will check for actions the directors or their connected parties may have taken, such as preferences or transactions at an undervalue. One of the conditions that must be satisfied in order to prove the transaction is actionable is that it was conducted in an ‘anterior period’, counting back from the date of the Liquidation, Administration or Bankruptcy.
