Transaction at an undervalue meaning

Checklist and timeline This concise checklist and timeline is prepared on the footing that proceedings are brought under sections 238 and/or 239 of the Insolvency Act 1986 (IA 1986) by an administrator or liquidator, and not by any assignee of the claim. Step/action: Review the events leading to the company’s insolvency and the factors underpinning the claim(s) against the respondent(s) (typically the recipients of the relevant payments/transactions). This involves securing the company’s books and records, accounting data/statements and bank statements, and interviewing directors, former directors, and any person with knowledge of the promotion, formation, business dealings, affairs or property of the company. Note that if the office-holder signals a claim against the respondent(s), they risk losing investigative powers under IA 1986, ss 235–236 in relation to that claim. Time (days): No limit (subject to limitation). Section/rule: IA 1986, ss 234–236, 238, 239; Cloverbay Ltd (joint administrators) v Bank of Credit and Commerce International SA [1991] Ch 90, [1991] 1 All ER 894. ...

This Flowchart outlines the prerequisites that must be met for the court to find a transaction occurred at an undervalue and to order suitable relief...

Checklist and timeline This concise checklist and timetable is prepared from the viewpoint of a claim started under sections 339 and/or 340 of the Insolvency Act 1986 (IA 1986) by a trustee in bankruptcy (trustee). Step/action Time (days) Section/rule Examine the background and circumstances culminating in the debtor’s bankruptcy and the issues underpinning the claim(s) against the respondent(s) (usually those who received the payments/transactions). This encompasses securing the books, papers or records concerning the bankrupt’s estate or affairs that must be handed to the trustee, and conducting interviews with, among others, the bankrupt, the bankrupt’s spouse, former spouse, civil partner or former civil partner, and any person who appears able to provide information about the bankrupt or their dealings, affairs or property, as relevant to the matters in issue. No limit (subject to limitation) IA 1986, ss 365–366 Prepare and issue the application containing the particulars required by Insolvency (England and Wales) Rules 2016 (IR...

Flowchart This Flowchart outlines the criteria that must be met for the court to find a transaction at an undervalue and then grant suitable relief accordingly...

Manolete Partners Plc v Howarth [2025] EWHC 2294 (Ch) What are the practical implications of this case? This judgment marks a significant victory for company directors and a sharp reminder to office‑holders and those pursuing claims on their behalf: contemporaneous records are paramount. The court condemned the failure to retain and produce meeting notes, emails and working papers, noting that gaps in the paper trail can justify adverse inferences. Insolvency practitioners should, therefore, keep meticulous files of the advice provided and the decisions taken. The court also affirmed that directors are entitled to place reliance on insolvency specialists’ guidance. Where a director behaves openly and follows the directions of a CVA supervisor, later accusations of preference or undervalue are harder to sustain. The evidential onus accordingly returns to the applicant, who must prove misconduct with cogent evidence. Further, the ruling indicates that salary‑for‑loan‑swap arrangements can be valid and commercially rational where structured to minimise PAYE/NIC and where they substitute, rather than add to, salary. Finally, the decision sounds a...

In this issue: Wills Probate Trusts UK taxes for Private Client HMRC Manuals updates Tax avoidance, evasion and non-compliance Contentious trusts and estates Scotland, Wales and Northern Ireland International Question of the week Daily and weekly news alerts LexTalk®Private Client: a Lexis+® community New and updated content Dates for your diary Trackers Latest Q&As Useful information Wills No line of sight—due execution and presence In the Estate of Kathleen Coady, District Judge Chloë Phillips delivered judgment in Coady v Coady PT-2023-BHM-000025 (Business & Property Courts in Birmingham (Probate)), addressing as a preliminary question whether a coronavirus (COVID-19) era ‘garden signing’ met section 9 of the Wills Act 1837. The court concluded it did not, rendering the 25 April 2020 Will invalid. Written by Charlotte John of Gatehouse Chambers. See News Analysis: No line of sight—due execution and presence In the Estate of Kathleen Coady. Probate...

Purkiss (as liquidator of Ethos Solutions Ltd) v Kennedy and others [2024] EWHC 1081 (Ch) What are the practical implications of this case? This judgment clarifies the scope of IA 1986, s 423 and confirms that tax avoidance, standing alone, is not an unlawful purpose. The respondents received monies they should not have obtained by joining a failed tax avoidance arrangement; yet, without additional evidence, IA 1986, s 423 was not the appropriate avenue to recover those sums What was the background? The Company was an umbrella enterprise established in 2008 that promoted and operated a tax avoidance scheme (the Scheme) intended to enable self‑employed participants to avoid paying income tax and national insurance contributions (NICs) on their earnings. Under the Scheme, individuals who had supplied services to an end user as consultants or independent contractors became employees of the Company and then delivered their services to the end user through the Company. Most of their remuneration was routed by the Company to an offshore employee...

This Practice Note provides a concise overview of bankruptcy and its effect on legal proceedings from a dispute resolution standpoint, summarising key points in practice... What is bankruptcy? Bankruptcy is an insolvency route for individuals. It applies to individuals only. Prior to 6 April 2016—and in contrast to corporate liquidation—only the court had power to make an individual bankrupt. From 6 April 2016, a new bankruptcy applications regime took effect, replacing debtors' bankruptcy petitions, though creditors' petitions remained unaffected. Petitions lodged by debtors before that date were unaffected; now, anyone seeking their own bankruptcy must file an online application decided by an adjudicator—an official of the Insolvency Service—rather than the court. For more detail and background, see News Analysis: New bankruptcy applications regime to come into force. Once a bankruptcy order is made—by the court or by the adjudicator—it releases the debtor from liabilities owed to creditors (subject to certain statutory exceptions) and bars unsecured creditors from starting—or continuing with—any legal process against the bankrupt or their property...

A guarantee operates as a species of quasi-security (see Practice Note: Guarantees). Within commercial finance, guarantees frequently serve as a standard form of credit support in lending transactions and wider arrangements. For instance, where a company is the borrower, the lender may seek guarantees from its directors. More rarely, and typically at the smaller end of the commercial finance market, the lender may ask a closely related family member of a director—such as a spouse, civil partner, or parent—to act as guarantor for the borrower. When obtaining an individual’s guarantee, a number of additional matters arise beyond those encountered in the general law of guarantees. This Practice Note sets out the principal issues to address when taking an individual guarantee in a commercial financing context, namely: the capacity of individuals to grant guarantees undue influence voidable transactions moratoriums under the debt respite scheme, and the potential applicability of consumer related rules, regulations and legislation The discussion focuses on the following...

Sections 242 and 243 of the Insolvency Act 1986 (IA 1986) In Scotland, these provisions regulate the two principal forms of antecedent transaction that a company may undertake. They do not apply to individuals or to companies registered in England and Wales; for the position in England, refer to the Practice Notes on transactions at an undervalue under section 238 and on preferences under section 239 of the Insolvency Act 1986. For Scottish individual/personal debtors, consult the Practice Note on gratuitous alienations by individual debtors. For a glossary of frequently used Scottish insolvency terminology, see Practice Note: Glossary of Scottish insolvency words and expressions. Unfair preferences What constitutes an unfair preference? An unfair preference is any transaction entered into by a company, whether before or after 1 April 1986, that has the effect of giving one creditor priority over the general body of creditors (IA 1986, s 243(1)). The date on which the unfair preference arises is the date the transaction became effectual. Hardening periods...

Applicant and Statement Details Applicant(s): [ insert initials and surname ] Statement number: [ insert number of witness statement eg 1st ] Exhibit: [ insert exhibit description ] Date: [ insert date of witness statement ] Case No: [ insert case number ] [ IN THE HIGH COURT OF JUSTICE BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES INSOLVENCY AND COMPANIES LIST (ChD) OR IN THE HIGH COURT OF JUSTICE BUSINESS AND PROPERTY COURTS IN [ insert location ] INSOLVENCY AND COMPANIES LIST (ChD) OR IN THE COUNTY COURT AT [ insert location ] BUSINESS AND PROPERTY WORK ] [ IN THE MATTER OF [ insert company’s name ] OR IN THE MATTER OF [ insert bankrupt’s name ] IN BANKRUPTCY ] AND IN THE MATTER OF THE INSOLVENCY ACT 1986 BETWEEN [ Insert name(s) of the Applicant(s) ] Applicant(s) AND [ Insert name(s) of the Respondent(s) ] Respondent(s) Witness statement number [ INSERT NUMBER ]...

CASE NO: [ insert case number ] [ In the High Court of Justice, Business and Property Courts of England and Wales, Insolvency and Companies List (ChD) OR In the High Court of Justice, Business and Property Courts in [ insert location ], Insolvency and Companies List (ChD) OR In the County Court at [ insert location ], Business and Property work ] Before: [ [Deputy] Insolvency and Companies Court Judge ............................. / The Honourable [Mr/Mrs] Justice .......................... / [Deputy] District Judge ............................. / [His/Her] Honour Judge .......................... ] Dated [ insert date ] [ In the matter of [ insert company’s name ] OR...

INSOLVENCY ACT APPLICATION NOTICE Use this Precedent alongside an application notice template that accords with the Insolvency (England and Wales) Rules 2016, SI 2016/1024, including Form IAA under IR 2016, r 1.35. Complete the following: case number; court heading (High Court—Business and Property Courts, Insolvency and Companies List (ChD), specifying location where appropriate, or County Court—Business and Property Work); and the matter (company or bankrupt) in bankruptcy and under the Insolvency Act 1986. Identify the Applicant(s) and Respondent(s) with full names and addresses, the company/bankrupt concerned, and the judicial level and court or hearing centre. Confirm whether the application sits within existing insolvency proceedings (YES/NO) and provide the related court reference. Statutory basis: section(s) 238, 239, 339 and/or 340. Relief sought: declaration of preference/transaction at an undervalue; repayment to restore the position; interest under the Court’s equitable jurisdiction or section 35A Senior Courts Act 1981; costs; any further order. Grounds: set out in the numbered witness statement with author and date. Service: list...