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. 

Who can bring an antecedent transaction claim? 

Claims under s238, s239 and s244 can only be brought by the officeholder — the liquidator, administrator or trustee in bankruptcy. Creditors and directors cannot bring these claims directly, though a creditor may apply to court for the officeholder to take action if they refuse to do so. 

Section 423 claims are broader in standing: they can be brought by the officeholder or, in certain circumstances, by a creditor who has been prejudiced by the transaction — even where no formal insolvency process is ongoing. 

Defending an antecedent transaction claim 

If you have received correspondence from a liquidator or administrator about a transaction, you should take independent legal advice as the position is serious but not necessarily without defence. The available defences depend on the type of claim that is being pursued and the facts.

For transactions at undervalue, a defence can arise where it can be demonstrated that: 

• the company entered the transaction in good faith 
• the transaction was made for the purpose of carrying on the company's business 
• at the time of the transaction, there were reasonable grounds to believe it would benefit the company 

For preference claims, a defence depends on whether there was an intention: the relevant desire to prefer must be shown. A payment made in response to genuine commercial pressure, particularly from an unconnected creditor, may not constitute a preference. However, where the recipient is a director or connected party, the presumption of desire applies and must be rebutted with evidence. 

Section 423 claims require the claimant to prove a purpose of prejudicing creditors. A transaction entered into for genuine commercial reasons, even if it had the incidental effect of reducing the value available to creditors, is unlikely to fall within s423 on its own. 

We strongly recommend taking legal advice before responding to any correspondence from an officeholder. Admissions or partial explanations made early on can significantly narrow your options.

Pursuing antecedent transaction claims on behalf of an estate 

For insolvency practitioners investigating a company's pre-insolvency conduct, antecedent transaction claims are often among the most valuable recoveries available to the estate. The statutory presumptions under s238 and s239 reverse the burden of proof in connected-party cases, making these claims easier to advance than ordinary breach of duty claims. 

KaurMaxwell works with and is instructed by insolvency practitioners across England and Wales to investigate claims and pursue litigation as a result ofantecedent transactions. Our approach is practical and recovery-focused: 

• Early assessment of the viability and quantum of claims, including analysis of the relevant look-back periods and available evidence 
• Detailed review of pre-insolvency accounting records, bank statements, and director conduct 
• Strategic advice on whether to issue proceedings, engage in pre-action correspondence or seek a negotiated settlement 
• Robust representation in court where claims are contested 

KaurMaxwell retains and holds Higher Rights of Audience and has represented clients in High Court antecedent transaction proceedings. We are instructed directly by insolvency practitioners and their firms, and can work alongside your preferred accountants and forensic advisers. 

Why instruct KaurMaxwell? 

• Experience on both sides: we have litigated, pursued, and defended antecedent transaction claims, giving us a practical understanding of how the opposing party will approach a case 
• Senior partner involvement: A hands-on role in all insolvency matters ensuring each legal team is carefully curated for each matter.  
• Higher Rights of Audience: we can represent you through all stages of High Court proceedings without the need to brief separate counsel 
• Direct and transparent: we give you a clear assessment of the merits of a claim and the realistic prospects of recovery or defence from the outset 

We are based in Holborn, London, and advise clients across England and Wales. Please contact us for a confidential initial discussion. 

Frequently asked questions 

What is an antecedent transaction in UK insolvency law? 

An antecedent transaction is a financial dealing or asset transfer made by a company before it entered formal insolvency that can be challenged and reversed by the liquidator or administrator. The main types are transactions at undervalue (s238), preferences (s239), transactions defrauding creditors (s423) and extortionate credit transactions (s244) — all governed by the Insolvency Act 1986. If you believe a transaction you were involved in may be subject to a claim, or you have received correspondence from an office holder, you should seek legal advice as early as possible. 

How far back can a liquidator challenge transactions? 

For preferences involving unconnected parties, the look-back period is six months from the onset of insolvency. For transactions at undervalue, and for preferences involving connected parties (such as directors or family members), the period extends to two years. Section 423 claims — transactions defrauding creditors — have no statutory time limit and can in principle be brought at any time. 

What defences are available against an antecedent transaction claim? 

Available defences depend on the type of claim. For transactions at undervalue, a complete defence exists if the transaction was entered into in good faith, for the purpose of carrying on the company's business, and on the reasonable belief that it would benefit the company. For preference claims, the absence of a desire to prefer is the key defence — though this is presumed where the recipient is connected to the company. Legal advice tailored to the specific transaction and circumstances is essential before responding to any claim. 

What is the difference between a preference and a transaction at undervalue? 

A preference concerns who was paid: it arises when a company improves the position of a particular creditor ahead of others,and the decision to do so was influenced by a desire to improve their position.  

A transaction at undervalue concerns what was received: it arises when the company gave away assets and/or provided services for no consideration or for significantly less than their market value. These transactions are challengeable under the Insolvency Act 1986 but involve different legal tests and available defences. 

Can a director be personally liable for an antecedent transaction? 

Yes, in certain circumstances. When a transaction is successfully challenged, the court may require the return of assets or payment of a sum equivalent to the value transferred. If that obligation falls on a director personally — for example, where they were the recipient of a preference or participated in a transaction at undervalue — they can be required to repay the company that is in administration or liquidation. Directors may also face disqualification proceedings iftheir conduct in connection with an antecedent transaction is found to have fallen below the required standard. These outcomes are fact-specific and legal advice should be taken immediately on receipt of any claim/correspondence. 

What is the difference between wrongful trading and an antecedent transaction? 

Wrongful trading (s214 IA 1986) and antecedent transaction claims are distinct causes of action. Wrongful trading concerns a director's conduct in continuing to trade after the point at which they knew or ought to have known there was no reasonable prospect of avoiding insolvent liquidation — the liability is personal and attaches to the director.  

Antecedent transactions, by contrast, relate to specific transactions made before insolvency and seek to unwind or recover the value of those transactions for the benefit of creditors. A single insolvency may give rise to both types of claim against the same director.