Voidable transaction cases
Main articles: Fraudulent conveyance, Undervalue transaction, Voidable preference, Voidable floating charge, and Unjust enrichment
Since the Fraudulent Conveyances Act 1571, transactions entered into by a bankrupt have been voidable if they would result in assets otherwise available to creditors becoming unduly depleted or particular creditors becoming unjustly enriched.[158] Initially transactions made only with the intention of depriving creditors of assets, or perverting the priorities for order of distribution were vulnerable, while the modern approach of the Insolvency Act 1986 contains more provisions that unwind transactions simply because their effect is deprivation of assets available to creditors. Reminiscent of the 1571 Act, under the Insolvency Act 1986 section 423, a company may recover assets if they were paid away for "significantly less than the value" of the thing, and this was done "for the purpose of" prejudicing other creditors' interests. In Arbuthnot Leasing International Ltd v Havelet Leasing Ltd (No 2)[159] Scott J held that the motive of the company or its directors was irrelevant, so that even though Havelet Leasing Ltd's lawyers had advised (quite wrongly) that their scheme of starting another company and transferring assets to it would be lawful, because the scheme's purpose was to put the assets out of other creditors' reach it breached section 423.
The rule in section 423 applies at any time before insolvency and requires proof of intention to prejudice other creditors, but other provisions have limits set before the date of winding up and require no proof of bad intent. Under section 238, transactions at an undervalue may be avoided regardless of their purpose, but only up to two years before the onset of insolvency.[160] For example, in Phillips v Brewin Dolphin Bell Lawrie Ltd[161] the liquidators of an insolvent company, AJ Bekhor Ltd, claimed rescind the transfer of assets to a subsidiary, whose shares were then purchased by the investment management house Brewin Dolphin for £1. The only other consideration given by Brewin Dolphin was the promise to carry out a lease agreement for computers, which itself was likely to be unwound and therefore worthless. The House of Lords held that the total package of connected transactions could be taken into account to decide whether a transaction was undervalued or not, and held that this one was.
Under IA 1986 section 127 operates to declare every transaction void entered after the presentation of a winding up petition unless it has the approval of the court. In Re Gray’s Inn Construction Co Ltd[162] Buckley LJ held that courts would habitually approve all contracts that were plainly beneficial to a company entered into in good faith and the ordinary course of business. The predominant purpose of the provision is to ensure unsecured creditors are not prejudiced, and the company's assets are not unduly depleted. In this case, however, because a host of transactions honoured by the company's bank, that was in overdraft, between the presentation and the winding up petition being granted meant unprofitable trading, the deals were declared void.[163]
Voidable preferences
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Sabtu, 14 Desember 2013
rs with similar claims equally, UK law creates significant exceptions to some fundamental pri
Increasing assets
Litigation by administrators and liquidators may avoid unfair transactions or preferences, and make former directors pay for wrongdoing. But because of a cautious culture, accountants bring few claims.
If a company has gone into an insolvency procedure, one of the objectives of the administrator or liquidator is to increase the assets that are available to distribute to creditors. To ensure fairness and to treat creditors with similar claims equally, UK law creates significant exceptions to some fundamental private law doctrines. The freedom to contract for any consideration, adequate or not,[153] is curtailed as transactions for an undervalue, or anything unregistered or after presentation of a winding up petition may be avoided.[154] The freedom to contract for any security interest[155] is restricted, as a company's attempt to give an undue preference to one creditor over another, particularly a floating charge for no new money, or any charge that is not registered can also be unwound.[156] Furthermore, particularly since the Cork Report's emphasis on increasing the accountability of company directors, practitioners may sue directors by summary procedure for breach of duties, especially negligence or conflicts of interest. Encroaching on limited liability and separate personality,[157] a specific, insolvency related claim was created in 1986 named wrongful trading, so if a director failed to put a company into an insolvency procedure, and ran up extra debts, when a reasonable director would have, he can be made liable to contribute to the company's assets. Any intentional wrongdoing and fraud is always dealt with strictly, yet a variety of claims exist without any such proof so as prevent unjust enrichment of selected creditor at others' expense and deter wrongdoing.
Voidable transactions
[show]
Litigation by administrators and liquidators may avoid unfair transactions or preferences, and make former directors pay for wrongdoing. But because of a cautious culture, accountants bring few claims.
If a company has gone into an insolvency procedure, one of the objectives of the administrator or liquidator is to increase the assets that are available to distribute to creditors. To ensure fairness and to treat creditors with similar claims equally, UK law creates significant exceptions to some fundamental private law doctrines. The freedom to contract for any consideration, adequate or not,[153] is curtailed as transactions for an undervalue, or anything unregistered or after presentation of a winding up petition may be avoided.[154] The freedom to contract for any security interest[155] is restricted, as a company's attempt to give an undue preference to one creditor over another, particularly a floating charge for no new money, or any charge that is not registered can also be unwound.[156] Furthermore, particularly since the Cork Report's emphasis on increasing the accountability of company directors, practitioners may sue directors by summary procedure for breach of duties, especially negligence or conflicts of interest. Encroaching on limited liability and separate personality,[157] a specific, insolvency related claim was created in 1986 named wrongful trading, so if a director failed to put a company into an insolvency procedure, and ran up extra debts, when a reasonable director would have, he can be made liable to contribute to the company's assets. Any intentional wrongdoing and fraud is always dealt with strictly, yet a variety of claims exist without any such proof so as prevent unjust enrichment of selected creditor at others' expense and deter wrongdoing.
Voidable transactions
[show]
do anything set out in sections 160, 165 and Schedule 4 for the purpose of its main duty. This i
Apart from petitions by the company or creditors, an administrator has the power to move a company into liquidation, carrying out an asset sale, if its attempts at rescue come to an end.[145] If the liquidator is not an administrator, he is appointed by the court usually on the nomination of the majority of creditors.[146] The liquidator can be removed by the same groups.[147] Once in place, the liquidator has the power to do anything set out in sections 160, 165 and Schedule 4 for the purpose of its main duty. This includes bringing legal claims that belonged to the company. This is to realise the value of the company, and distribute the assets. Assets must always be distributed in the order of statutory priority: releasing the claims of fixed security interest holders, paying preferential creditors (the liquidator's expenses, employees and pensions, and the ring fenced fund for unsecured creditors),[148] the floating charge holder, unsecured creditors, deferred debts, and finally shareholders.[149] In the performance of these basic tasks, the liquidator owes its duties to the company, not individual creditors or shareholders.[150] They can be liable for breach of duty by exercising powers for improper purposes (e.g. not distributing money to creditors in the right order,[151]) and may be sued additionally for negligence.[152] As a person in a fiduciary position, he may have no conflict of interest or make secret profits. Nevertheless, liquidators (like administrators and some receivers) can generally be said to have a broad degree of discretion about the conduct of liquidation. They must realise assets to distribute to creditors, and they may attempt to maximise these by bringing new litigation, either to avoid transactions entered into by the insolvent company, or by suing the former directors.
Increasing assets
Litigation by administrators and liquidators may avoid unfair transactions or preferences, and make former directors pay for wrongdoing. But because of a cautious culture, accountants bring few claims.
Rabu, 06 November 2013
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