Challenging antecedent transactions in Guernsey
This article concerns the investigation of antecedent transactions during the course of the winding up of a company, with a focus on preferences given by companies and transactions at undervalue.
The prevailing theoretical view is that (with a few exceptions) all creditors must be treated equally. If there is any unfairness in any prior financial dealings which would reduce the asset pool available to other creditors then liquidators should have the power to investigate these offences and the Court, if necessary, should have the power to rectify or set aside these transactions.
The ability of office holders to unwind previous transactions entered into by the directors of a company is of crucial importance in augmenting the assets of the insolvent company. Unsurprisingly, Channel Islands’ legislation in relation to antecedent transactions is closely based on the UK 1986 Insolvency Act (the 86 Act). There are extensive provisions in the 86 Act which range from transactions at undervalue (section 238), preferences (section 239), extortionate credit transactions (section 244), and the avoidance of certain floating charges (section 245). There is also a parallel undervalue provision in section 423 of the 86 Act which has the added advantage of not requiring a company to be insolvent at the time of the transaction nor for the transaction to have taken place within a prescribed period. Guernsey has only incorporated a few of these provisions…
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