Antecedent transaction & insolvency solicitors

If an administrator or liquidator has contacted you about a transaction that occurred before your company became insolvent, you need specialist legal advice quickly. The Insolvency Act 1986 gives officeholders significant powers to investigate and challenge pre-insolvency dealings and the consequences for directors, connected parties and creditors can be severe. 

At KaurMaxwell, our insolvency team acts on both sides of antecedent transaction claims. We advise insolvency practitioners pursuing recoveries for the benefit of creditors, and we represent company directors and connected parties defending against claims. Our team of solicitors, have prosecuted and defended antecedent transaction claims throughout it's inception, including in complex matters. 

What is an antecedent transaction?

An antecedent transaction is a financial dealing or asset transfer that took place before a company entered formal insolvency, typically administration or liquidation, which can be challenged and reversed by the officeholder. 

The purpose of the law is straightforward: to ensure creditors are treated fairly and that assets are not stripped out of a company in the period leading up to insolvency proceedings. Where the court finds that a transaction was improper, it can order the restoration of assets to the insolvent estate.

Types of antecedent transaction under the Insolvency Act 1986

The Insolvency Act 1986 sets out several distinct types of challengeable transaction. Each carries its own legal test, time limits and available defences. 

Transactions at undervalue (s238) 

A transaction at undervalue occurs where a company transfers assets or provides services for no consideration, or for significantly less than their market value. Common examples include selling property to a connected party at a discount, gifting assets before insolvency, or writing off debts owed by directors or family members. 

The officeholder must show that the company was insolvent at the time, or became insolvent as a result. There is a rebuttable presumption of insolvency where the other party is connected to the company. 

Preferences (s239) 

A preference occurs when a company does something, or allows something to be done, that puts a creditor, surety or guarantor in a better position than it would have been in, in an administration/liquidation. Repaying a director's loan in full while leaving trade creditors unpaid is a classic example. 

The officeholder must show that the company was influenced by a desire to prefer the creditor. Where the recipient is connected to the company, this desire is presumed unless the contrary is shown, placing a significant burden on the director or recipient to rebut the claim. 

Transactions defrauding creditors (s423) 

Section 423 is a broader and more powerful provision than s238 or s239. It allows a claim to be brought in respect of any transaction entered into at undervalue where the purpose was to put assets beyond the reach of creditors, or to otherwise prejudice their interests. Crucially, there is no look-back period — a s423 claim can be brought regardless of when the transaction occurred. 

Because of the purposive element required, s423 claims are typically brought in cases involving deliberate asset-stripping or sophisticated evasion. The burden of proof lies with the claimant. 

Extortionate credit transactions (s244) 

Where a company has entered into a credit transaction on grossly exorbitant terms — or otherwise grossly contravened ordinary principles of fair dealing — the officeholder can apply to have the transaction set aside or varied. This provision is used less frequently but remains an important tool in certain restructuring contexts.

Look-back periods: how far back can a claim go?

The time periods within which claims can be brought are defined by s240 of the Insolvency Act 1986, measured back from the onset of insolvency (broadly, the date of the insolvency event such as the winding-up order or appointment of administrator(s)). 

Transactions at undervalue (s238 IA 1986)

Connected party look-back: 2 years

Unconnected party look-back: 2 years

Preferences (s239 IA 1986)

Connected party look-back: 2 years

Unconnected party look-back: 6 months

Transactions defrauding creditors (s423 IA 1986)

Connected party look-back: No time limit

Unconnected party look-back: No time limit

Extortionate credit transactions (s244 IA 1986)

Connected party look-back: 3 years

Unconnected party look-back: 3 years

Note: a party is 'connected' to the company if they are a director, shadow director, associate of a director, or a company in the same group. The connected-party definition is interpreted broadly, and it should not be assumed that the definition does not apply without taking advice. 

Important: Time limits are not extended simply because the officeholder was unaware of the transaction. If you have received a claim or letter of enquiry, take professional advice immediately — delay can significantly limit your options.