Voidable transactions

Question 1

Who may bring a claim for a voidable transaction?

Answer 1

liquidator or administrator

Question 2

Name the 4 types of voidable transactions

Answer 2

1. TAU
2. preference
3. avoidance of floating charge
4. TDC

Question 3

What is the relevant time to bring claim for TAU? State for unconnected and connected person

Answer 3

unconnected = 2 years
connected = 2 years

Question 4

What is the relevant time?

Answer 4

The time from the transaction to the onset of insolvency

Question 5

What is the relevant time to bring claim for preference? State for unconnected and connected person

Answer 5

unconnected: 6 months
connected: 2 years

Question 6

What is the relevant time to bring claim for avoidance of floating charge? State for unconnected and connected person

Answer 6

unconnected: 12 months
connected: 2 years

Question 7

What is the relevant time to bring claim for TDC?

Answer 7

no relevant time - the more recent since transaction the better

Question 8

What must be proved to establish a preference transaction to unconnected person? (2)

Answer 8

A desire to prefer + insolvency

Question 9

What must be proved to establish a preference transaction to connected person?

Answer 9

insolvency

Question 10

What type of test is the “desire to prefer”?

Answer 10

subjective

Question 11

What is a defence to TAU? (2)

Answer 11

1. good faith
2. reasonable grounds for believing it would benefit the company

Question 12

What is the restoration order for avoidance of floating charge?

Answer 12

security is void but not the debt

Question 13

What are the 2 types of transactions where insolvency is not required at the date or as a result of transaction?

Answer 13

1. Avoidance of floating charge - connected person
2. TDC

Question 14

What are the 2 types of transactions where a presumption is available?

Answer 14

1. TAU - connected (insolvency)
2. preference - connected (desire to prefer but not insolvency)

Question 15

Who can a claim for fraudulent trading be brought against? Any person…(2)

Answer 15

i. knowingly party to the carrying on of business
ii. with intent to defraud

Question 16

What must be proved for a successful fraudulent trading claim?

Answer 16

Dishonesty:
i. subjective state of mind
ii. objective standard of ordinary decent people

Question 17

What remedies are available for fraudulent/wrongful trading? (3)

Answer 17

1. Compensatory – court discretion
2. Disqualification order
3. Criminal sanctions

Question 18

Who can a claim be brought against for wrongful trading?

Answer 18

Director at relevant time (all forms)

Question 19

What must be proved for a successful claim in wrongful trading? (2)

Answer 19

1. insolvency - at no point of return - director knew or ought to have known = objective/subjective test
2. continued trading and made company’s position worse

Question 20

What is a possible defence a director can raise for wrongful trading? Name an example

Answer 20

1. Took every step with view to minimising potential loss
2. Voicing concerns at BM and proof in minutes