Application to set aside a transfer at an undervalue
| Author | Mark Watson-Gandy |
| Pages | 315-332 |
OBJECTIVE
The court has wide powers on the application of the administrator or the liquidator to rewind transfers of the company’s property which have been undertaken at a time when the company is insolvent for no consideration or for significantly less than the value in money or money’s worth provided by the company.
To be challenged, the transaction at an undervalue must have occurred at a time in the period of 2 years ending with the onset of insolvency.
APPLICATION
Proceedings are commenced by application form (Form IAA).
The application should be returnable to the registrar in the Companies Court or to the district judge in a Chancery District Registry or county court with insolvency jurisdiction.
The respondent should be the other party to the transaction that the liquidator or administrator is seeking to set aside.
316 Corporate Insolvency Practice
COURT FEES
Where fresh proceedings need to be brought, a court fee of £280 is payable.
EVIDENCE
The application should be supported by a witness statement by the liquidator or administrator. This will need to address:
ƒ the liquidator’s name;
ƒ the liquidator’s address;
ƒ the order he seeks;
ƒ the date the company was incorporated;
ƒ the registered office of the company;
ƒ the nominal share capital of the company;
ƒ the issued share capital of the company;
ƒ the objects of the company;
ƒ the date upon which the petition to wind up the company or place it into administration or notice of administration was presented;
ƒ the date upon which the company went into liquidation or administration; ƒ that he was appointed as liquidator or administrator of the company;
ƒ the date upon which he was appointed as liquidator or administrator;
ƒ the date of the transaction subject to challenge;
ƒ the particulars of the transaction subject to challenge;
ƒ the value of the company’s asset transferred under the transaction;
ƒ that the asset was transferred for no consideration or identifying the price it was transferred for and stating that this was significantly less than its value in money or money’s worth;
ƒ whether the respondent is a connected person and, if so, why it is said so; ƒ that the company was insolvent (or is to be presumed to be insolvent) at the time of the transaction or was rendered insolvent by the transaction;
ƒ the company did not enter into the transaction in good faith and for the purposes of carrying on its business and there would have been no reasonable grounds for believing that the transaction would benefit the company.
The witness statement should exhibit:
ƒ evidence of his appointment as liquidator or administrator;
ƒ a copy of the petition to wind up the company or place it into administration or notice of administration;
ƒ a copy of the winding up or administration order;
ƒ evidence of the transaction subject to challenge;
ƒ the value of the company’s asset transferred under the transaction and of its date and the consideration (if any) paid;
ƒ evidence that the respondent is a connected person (if applicable);
ƒ evidence tending to show the insolvency of the company at the time of the transaction;
ƒ an independent valuation of the property disposed of.
SERVICE
The application and the evidence in support will need to be filed at court and served on the respondent as soon as practicable after it is filed and in any event, unless it is necessary to apply without notice or on short notice, at least 14 days before the date fixed for the hearing.
The usual rule is that, subject to any other express provision, the application must be served at least 14 days before the date fixed for the hearing.
Service may be effected personally
THE FIRST HEARING
At the first hearing, the registrar or district judge will give directions as to whether points of claim and defence are needed and for the filing of evidence. He may also require the application to be served on other people. He may give directions as to whether witnesses are to attend for cross examination. The first hearing will be unrobed and is likely to be in chambers.
318 Corporate Insolvency Practice
KEY STATUTORY PROVISIONS
Sections 238, 240, 241 and 435 of the Insolvency Act 1986
238 Transactions at an undervalue (England and Wales)
(1) This section applies in the case of a company where—
(a) the company enters administration, or
(b) the company goes into liquidation;
and ‘the office-holder’ means the administrator or the liquidator, as the case may be.
(2) Where the company has at a relevant time (defined in section 240) entered into a transaction with any person at an undervalue, the office-holder may apply to the court for an order under this section.
(3) Subject as follows, the court shall, on such an application, make such order as it thinks fit for restoring the position to what it would have been if the company had not entered into that transaction.
(4) For the purposes of this section and section 241, a company enters into a transaction with a person at an undervalue if—
(a) the company makes a gift to that person or otherwise enters into a transaction with that person on terms that provide for the company to receive no consideration, or
(b) the company enters into a transaction with that person for a consideration the value of which, in money or money’s worth, is significantly less than the value, in money or money’s worth, of the consideration provided by the company.
(5) The court shall not make an order under this section in...
Get this document and AI-powered insights with a free trial of vLex and Vincent AI
Get Started for FreeStart Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting