Bankruptcy - selling assets below cost
Discussion
Someone who owes us money has entered into bankruptcy. They sold some shares they owned in a private company a few weeks before going into bankruptcy, and they sold these to someone they knew personally.
The prices that the shares changed hands at was considerably below market value according to the advice we've had. As it is a private company, it is difficult to value them.
What are the implications of this? Will the official receiver do anything about it?
The prices that the shares changed hands at was considerably below market value according to the advice we've had. As it is a private company, it is difficult to value them.
What are the implications of this? Will the official receiver do anything about it?
edb49 said:
Someone who owes us money has entered into bankruptcy. They sold some shares they owned in a private company a few weeks before going into bankruptcy, and they sold these to someone they knew personally.
The prices that the shares changed hands at was considerably below market value according to the advice we've had. As it is a private company, it is difficult to value them.
What are the implications of this? Will the official receiver do anything about it?
Yes. They'll probably unravel the sale if it's a naughty one. If it's large scale then it's deep doo doo.The prices that the shares changed hands at was considerably below market value according to the advice we've had. As it is a private company, it is difficult to value them.
What are the implications of this? Will the official receiver do anything about it?
Ed, should have given me a bell on this, if its about the same debtor.
It should be covered under Transaction at undervalue section 238 of The Insolvency Act 1986:
To quote:
Normally, for a transaction to be set aside as an undervalue transaction, the liquidator or equivalent must demonstrate that:
the consideration received by the company in the transaction, in money or money's worth is significantly less than the value, in money or money's worth, provided by the company;
the transaction was entered into during the "vulnerability period"; and
at the time of the transaction, the company was unable to pay its debts as they fell due, or became unable to pay its debts as they fell due as a result of the transaction
It may also fall into unfair preference
It should be covered under Transaction at undervalue section 238 of The Insolvency Act 1986:
To quote:
Normally, for a transaction to be set aside as an undervalue transaction, the liquidator or equivalent must demonstrate that:
the consideration received by the company in the transaction, in money or money's worth is significantly less than the value, in money or money's worth, provided by the company;
the transaction was entered into during the "vulnerability period"; and
at the time of the transaction, the company was unable to pay its debts as they fell due, or became unable to pay its debts as they fell due as a result of the transaction
It may also fall into unfair preference
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