Click here to learn more about our revolutionary app or download directly from one of the sources below.
Voidable transactions (often also called ‘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 a voidable 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.
The reason an officeholder will choose to pursue a voidable transaction is 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 the officeholder can choose to pursue them for their previous transactions to seek a remedy that will be paid into the estate and augment 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.
Voidable means that the action is valid, but can be avoided; in this case by the officeholder who takes action to reverse what has been done by directors or other persons.
See also ‘voidable transactions’.
[See ‘Liquidator’, ‘Administrator’, ‘Insolvency Act’, ‘Transaction at an Undervalue’, ‘Preference’, ‘Officeholder’, ‘Voidable’ and ‘Bankruptcy’.]
A voluntary Liquidation can be either a Members’ Voluntary Liquidation (MVL) or Creditors’ Voluntary Liquidation.
The shareholders/members of a company will vote on a special resolution at a general meeting to place the company in the hands of a Liquidator; effectively ending the company’s legal existence.
