Scotland: gratuitous alienations by individual debtors
Produced in partnership with James Lloyd of Harper Macleod LLP

The following Restructuring & Insolvency practice note produced in partnership with James Lloyd of Harper Macleod LLP provides comprehensive and up to date legal information covering:

  • Scotland: gratuitous alienations by individual debtors
  • Coronavirus (COVID-19)
  • What can be challenged?
  • What is a Relevant Day?
  • Who may bring a challenge?
  • What is the effect of a challenge
  • Solvency of the debtor
  • The test
  • Aspects of proof
  • Adequate consideration
  • More...

Scotland: gratuitous alienations by individual debtors

For any insolvency process to operate effectively, it is essential the person appointed to wind-up the insolvent estate has powers that enable them to scrutinise dealings by the insolvent party with their assets prior to the commencement of the formal insolvency process. Absent such powers, parties or companies facing insolvency could take steps to alienate assets to connected third parties for less than their true worth to the prejudice of the general body of creditors. The purpose of this Practice Note is to consider the circumstances in which such transactions can be challenged, the grounds upon which challenges will be upheld by the courts and the effect of such a successful challenge. For details of the equivalent rules for Scottish corporate debtors, see Practice Note: Scotland: Antecedent transactions by corporate debtors. For a glossary of commonly used Scottish insolvency terms, see Practice Note: Glossary of Scottish insolvency words and expressions.

Historically such transactions have been challengeable under the common law on the basis that they were fraudulent preferences. The common law is however cumbersome and proving the elements required to establish a case of fraud is difficult. As a result, the common law has, almost entirely, been superseded by statutory remedies. These are to be found in section 98 of the Bankruptcy (Scotland) Act 2016 ((Ba(S)A 2016) (previously section 34

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