Q&As

Is it possible for a guarantee to be set aside as an antecedent transaction such as a transaction at an undervalue or a preference? If so, what, if anything, can a creditor do to protect its position?

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Published on LexisPSL on 26/01/2017

The following Banking & Finance Q&A provides comprehensive and up to date legal information covering:

  • Is it possible for a guarantee to be set aside as an antecedent transaction such as a transaction at an undervalue or a preference? If so, what, if anything, can a creditor do to protect its position?
  • Transactions at an undervalue
  • A guarantee could be set aside as a transaction at an undervalue
  • How likely is it that the claim will be successful?
  • Preferences
  • The granting of a guarantee could be a voidable preference
  • The desire to prefer
  • Other issues to consider
  • What can a creditor do to protect its position?
  • Corporate guarantors
  • More...

Is it possible for a guarantee to be set aside as an antecedent transaction such as a transaction at an undervalue or a preference? If so, what, if anything, can a creditor do to protect its position?

The key issues to examine when considering whether a guarantee could be set aside as an antecedent transaction are:

  1. transactions at an undervalue, and

  2. preferences

Transactions at an undervalue

For information on transactions at an undervalue in general in a corporate insolvency context, see: Transactions at an undervalue—IA 1986, s 238.

A guarantee could be set aside as a transaction at an undervalue

The court is entitled to set aside a transaction under section 238 of Insolvency Act 1986 (IA 1986) in the case of a corporate insolvency or IA 1986, s 339 in the case of individual bankruptcies if:

  1. in the case of:

    1. a company, it entered into that transaction (a) as a gift or on terms providing that it will receive no consideration, or (b) on terms providing that it will receive consideration worth significantly less than the value of the consideration that it will provide, or

    2. an individual, they entered into that transaction (a) as a gift or on terms providing that they will receive no consideration, (b) in consideration of marriage or the formation of a civil partnership or (c) on terms providing that they will receive

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