Director information hub: Transactions made before insolvency can be recovered
Some company transactions may be challenged if a company enters liquidation or administration.
Antecedent transactions
Some transactions made by a company before it goes into liquidation or administration can be challenged by the liquidator or administrator. These are known as antecedent transactions.
For example:
- a company enters into transactions that favour one creditor over others
- if someone other than a creditor has benefited from a transaction or gift that has disadvantaged the company’s creditors
Recovery and other consequences
If the administrator or liquidator believes that a transaction could be challenged, they will recover the money or assets for the benefit of all the creditors.
You could also be disqualified from acting as a company director and there may be other consequences.
Professional advice or guidance
Some companies may dispose of assets or goods prior to entering a formal insolvency process as part of a genuine effort to continue trading and remain in business.
If your company is at risk of insolvency and you are concerned about a potential transaction, you should seek professional advice from an accountant or insolvency practitioner.
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