Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Gratuitous alienation definition

What does Gratuitous alienation mean? In Scottish insolvency practice, a gratuitous alienation is a transfer or disposal of assets by a debtor for no consideration or for significantly less than market value before insolvency, which can be challenged and set aside. It is a statutory concept: for companies under the Insolvency Act 1986 (Scotland) and for individuals under the Bankruptcy (Scotland) Act 2016. Typical applications include undoing pre-insolvency gifts or intra‑group transfers. An insolvency office-holder (liquidator, administrator or trustee in sequestration) may seek reduction of the transfer and restoration or compensation. Key features include a look‑back period: for companies, two years where the recipient is not connected...

Gratuitous Alienation and Transactions at an Undervalue in Scotland: Risks, Defences and Remedies in Pre-insolvency Property Deals

Published by a LexisNexis Property expert

Practice notes

Background

One of the core tenets of an effective Insolvency regime is that an Insolvency Practitioner (described in this Practice Note as an ‘IP’) may examine the conduct of the insolvent party (described in this Practice Note as the ‘Debtor’) in the period preceding insolvency, to determine whether earlier transactions have improperly disadvantaged the valid claims of creditors by reason of antecedent dealings. For instance, a Debtor facing financial distress might have disposed of particular assets at undervalue to generate quick cash in the short term. Yet, by doing so (and effectively placing those assets beyond creditors’ reach) the Debtor may have weakened creditors’ prospects of recovery and nullified any security they held over those assets (for example, a floating charge), rendering it redundant. Although an IP will, for the most part, be focussed on a snapshot of the Debtor’s assets and liabilities at the time of appointment with a view to distributing to creditors, the entitlement to review and potentially recover assets transferred pre-appointment can, in parallel, be a possible source of income for the insolvent estate. Under the Bankruptcy (Scotland) Act 2016 (Ba(S)A 2016) and the Insolvency Act 1986 (IA 1986), IPs...

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Craig Falconer

Addleshaw Goddard

Craig is an Associate in the Finance and Projects Division of Addleshaw Goddard LLP. With a commercial real estate background, Craig focusses on all aspects of distressed real estate, acting for lenders, insolvency practitioners and corporates in connection with the acquisition, management and sale of distressed property and has been involved in a number of large portfolio sales. Craig also regularly advises lenders, investors and corporates on all aspects of real estate finance projects....

Web page updated on 21/05/2026

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