INV - Avoidance of Antecedent Transactions
73 Questions
0 Views

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the maximum relevant time period for challenging transactions with unrelated persons under Section 226 of the IRDA?

  • 2 years
  • 3 years
  • 1 year (correct)
  • 6 months

In the context of Undue Preference (UUP), what is necessary to establish a claim under Section 224 of the IRDA?

  • Transaction occurred more than 2 years ago
  • Transaction must involve a connected person
  • Transaction entered into without consideration
  • Company is in judicial management or winding up (correct)

What does Section 226(2) of the IRDA specifically require for an effective challenge of transactions?

  • The transaction must be with a third party
  • The transaction must favor a creditor
  • The transaction must involve personal assets
  • The company must be unable to pay its debts (correct)

Under Section 225(3) of the IRDA, what is considered a factor for a transaction at an undervalue (TUV)?

<p>The potential for guaranteeing better terms (B)</p> Signup and view all the answers

What does the presumption of 'influenced by desire to prefer' imply in the context of UUP as indicated in Section 225(5) of the IRDA?

<p>There is no rebuttal for the presumption (A)</p> Signup and view all the answers

Under what circumstances can a court relieve a person from personal liability according to S 239(2) IRDA?

<p>If the relief is for personal liability. (A)</p> Signup and view all the answers

Which section of the IRDA allows a court to declare a party personally responsible for debts of a company?

<p>S 239(1) (A)</p> Signup and view all the answers

What must be shown for a court to declare a person responsible for a company's debts under S 239(1) IRDA?

<p>The company traded wrongfully. (A)</p> Signup and view all the answers

What type of liability can the court relieve under S 239(2) IRDA?

<p>Personal liability (D)</p> Signup and view all the answers

Who can apply for the court’s declaration regarding personal responsibility for a company's debts under S 239(1) IRDA?

<p>Any person in the defined group in Subsection (5) (D)</p> Signup and view all the answers

What is required to establish a wrongful trading scenario under section 239 of the IRDA?

<p>That the company had no reasonable prospect of meeting its debts. (A)</p> Signup and view all the answers

Which section outlines the responsibilities for fraudulent trading?

<p>Section 238 IRDA (C)</p> Signup and view all the answers

What must be shown to establish that a transaction was void under section 130 of the IRDA?

<p>There was an intention behind the transaction to avoid debt obligations. (A)</p> Signup and view all the answers

Which subsection indicates that a court order does not provide immunity to a company under the IRDA?

<p>Section 225(6) (B)</p> Signup and view all the answers

In the context of the IRDA, what is included in the definition of 'relevant time'?

<p>The date the company became insolvent. (B)</p> Signup and view all the answers

What does section 226(5) of the IRDA establish concerning time periods?

<p>It provides alternative periods for the consideration of transactions. (A)</p> Signup and view all the answers

Under section 227 of the IRDA, what can courts grant regarding transactions under investigation?

<p>A variety of orders impacting current and past transactions. (A)</p> Signup and view all the answers

What key factor is considered under section 238 that distinguishes fraudulent trading?

<p>The intent to defraud creditors. (D)</p> Signup and view all the answers

What type of obligations may the court make additional orders regarding under S 239(3) IRDA?

<p>Debts or obligations due from the company to a person liable (A)</p> Signup and view all the answers

In S 239(3) IRDA, what can the court include in its orders concerning any charge?

<p>Any interest in a charge on assets of the company (B)</p> Signup and view all the answers

What does S 239(3) IRDA provision for regarding sums received?

<p>Payments should be made to specific persons or classes of persons (C)</p> Signup and view all the answers

Under which condition may the court make additional orders according to S 239(3) IRDA?

<p>If there is a debt or obligation arising from the company's liabilities (C)</p> Signup and view all the answers

Which of the following is NOT explicitly mentioned as an area of focus for additional orders under S 239(3) IRDA?

<p>Honesty of company directors (B)</p> Signup and view all the answers

What is the maximum penalty for wrongful trading under S 239(6) IRDA?

<p>Up to $10,000 fine or 3 years imprisonment (D)</p> Signup and view all the answers

Who can apply to the Court for a declaration regarding wrongful trading?

<p>Judicial manager/liquidator or the Court (D)</p> Signup and view all the answers

Which statement is true regarding the guilty parties in wrongful trading under S 239(6) IRDA?

<p>Any person who was party to the wrongful trading is guilty. (C)</p> Signup and view all the answers

What type of conduct can a company apply to the Court to ascertain if it constitutes wrongful trading?

<p>A particular course of conduct, transaction or series of transactions at the time of application or thereafter (A)</p> Signup and view all the answers

What does S 239(10) IRDA explicitly allow regarding a company's actions?

<p>A company may apply to the Court for a declaration of wrongful trading. (D)</p> Signup and view all the answers

What type of circumstances does S 239(6) IRDA focus on?

<p>Wrongful trading activities (C)</p> Signup and view all the answers

In the context of S 239(5) IRDA, what role does a judicial manager play?

<p>They apply for declarations related to wrongful trading. (D)</p> Signup and view all the answers

Under wrongful trading provisions, what is the Threshold for the maximum fine under S 239(6) IRDA?

<p>Up to $10,000 (A)</p> Signup and view all the answers

What does S 239(3) IRDA allow the court to address regarding obligations?

<p>Debts and charges related to assets of the company (C)</p> Signup and view all the answers

Which of the following is explicitly included in the provisions made by S 239(3) IRDA?

<p>Provisions for sums received to be paid to specific persons (D)</p> Signup and view all the answers

Which statement best reflects the intent of additional orders that a court may issue under S 239(3) IRDA?

<p>To clarify debts and obligations owed to specific claimants (C)</p> Signup and view all the answers

What types of charges may the court address according to S 239(3) IRDA?

<p>Any interest in charges on any assets of the company (C)</p> Signup and view all the answers

In what context is S 239(3) IRDA particularly relevant?

<p>During the liquidation process of a company (D)</p> Signup and view all the answers

What does Section 224(3) of the IRDA imply about certain transactions?

<p>They are deemed to have no consideration or are worth less than their actual value. (B)</p> Signup and view all the answers

Under Section 226 of the IRDA, what is the relevant time for challenging transactions with connected persons?

<p>2 years (D)</p> Signup and view all the answers

In the context of the IRDA, what is the presumptive condition for an Undue Preference claim under Section 225(5)?

<p>The respondent cannot deny the existence of a desire to prefer. (B)</p> Signup and view all the answers

What must be established for a transaction to be classified as a transaction at an undervalue (TUV) under Section 225?

<p>It must involve a connected person fully aware of the company’s financial situation. (A)</p> Signup and view all the answers

What is the potential outcome of a transaction deemed to have occurred at an undervalue under Section 225(2) of the IRDA?

<p>The court may restore the transaction as if it never happened. (B)</p> Signup and view all the answers

What are the elements necessary for a claim of Unfair or Undue Preference under the IRDA?

<p>The company must be in judicial management or winding up. (C)</p> Signup and view all the answers

According to Section 227 of the IRDA, what can the court grant concerning transactions that are being challenged?

<p>Orders restoring the transactions to their original state. (C)</p> Signup and view all the answers

What aspect does Section 226(3) of the IRDA address regarding transactions?

<p>The implications of transactions entered into with connected persons. (B)</p> Signup and view all the answers

What is one potential consequence for a person found guilty of wrongful trading under S 239(6) IRDA?

<p>Fine up to $10,000 or imprisonment for a term not exceeding 3 years (D)</p> Signup and view all the answers

Who is NOT authorized to apply to the court for a declaration concerning wrongful trading according to S 239(5) IRDA?

<p>Shareholder with majority interest (A)</p> Signup and view all the answers

What does S 239(10) IRDA allow a company or any person to apply for?

<p>Clarification on whether their conduct constitutes wrongful trading (A)</p> Signup and view all the answers

Under which condition does S 239(6) IRDA stipulate criminal liability?

<p>If wrongful trading has been established (C)</p> Signup and view all the answers

What specific maximum term of imprisonment can be imposed for wrongful trading under S 239(6) IRDA?

<p>3 years (A)</p> Signup and view all the answers

Which of the following roles does NOT have the authority to apply for a judgment under S 239(5) IRDA?

<p>Tax auditor (C)</p> Signup and view all the answers

What is the primary focus of S 239(6) IRDA?

<p>Criminal liability for wrongful trading (C)</p> Signup and view all the answers

What must a company do to inquire if its conduct constitutes wrongful trading as per S 239(10) IRDA?

<p>Apply for a declaration to the court (A)</p> Signup and view all the answers

According to S 239(6) IRDA, who can be found guilty in the context of wrongful trading?

<p>All parties involved in the trading activity (A)</p> Signup and view all the answers

What is the purpose of S 239(10) IRDA regarding company conduct?

<p>To clarify the legality of particular conduct or transactions (C)</p> Signup and view all the answers

What must a court find in order to relieve a person from personal liability for wrongful trading under S 239(2) IRDA?

<p>The person had a reasonable belief that the company's trading was lawful. (B)</p> Signup and view all the answers

Under which circumstances can a court declare a party personally responsible for a company's debts according to S 239(1) IRDA?

<p>If the company has traded wrongfully. (C)</p> Signup and view all the answers

What type of liabilities can the court address for persons found responsible under S 239(2) IRDA?

<p>Personal liability for debts incurred during wrongful trading. (B)</p> Signup and view all the answers

Who qualifies to apply for a court declaration regarding a party's personal responsibility for a company’s debts as per S 239(1) IRDA?

<p>Any party recognized by the court during the judicial process. (A)</p> Signup and view all the answers

Which of the following elements is crucial for establishing wrongful trading under Section 239 of the IRDA?

<p>Showing the lack of reasonable belief in the company’s ability to continue trading. (B)</p> Signup and view all the answers

What can a court order regarding charges as per S 239(3) IRDA?

<p>Additional terms concerning the management of company assets. (C)</p> Signup and view all the answers

What is the primary focus of S 239(6) IRDA regarding wrongful trading?

<p>To define the maximum penalties for wrongful trading. (C)</p> Signup and view all the answers

Under S 239(10) IRDA, what may a company seek regarding its trading actions?

<p>A declaration confirming the legality of their past trading. (D)</p> Signup and view all the answers

Which statement correctly describes the role of a judicial manager under S 239(5) IRDA?

<p>They manage the company's financial rehabilitation efforts. (B)</p> Signup and view all the answers

What is required for a company to trade without meeting its debts according to section 239(12) of the IRDA?

<p>The company must not have reasonable prospect of meeting its debts. (C)</p> Signup and view all the answers

What does section 238 of the IRDA define in relation to trading activities?

<p>The responsibility for fraudulent trading. (D)</p> Signup and view all the answers

Which condition is NOT mentioned in section 239(12) for wrongful trading?

<p>Engagement in misleading financial practices. (D)</p> Signup and view all the answers

What factor does section 226(1)(a) emphasize for the assessment of a transaction?

<p>The financial conditions at the time of the transaction. (C)</p> Signup and view all the answers

What limitation does section 227 of the IRDA impose on court orders?

<p>Court orders cannot deem any transaction void. (A)</p> Signup and view all the answers

What consequence is addressed regarding transactions with connected persons as per section 226(3)?

<p>They can lead to presumed undue preference. (B)</p> Signup and view all the answers

Which scenario is a characteristic of fraudulent trading per section 238?

<p>Deliberate actions taken to prevent creditor payments. (B)</p> Signup and view all the answers

Which of the following constitutes a void disposition according to section 130 of the IRDA?

<p>A transaction conducted with the intent to benefit only shareholders. (B)</p> Signup and view all the answers

What type of trading practice does section 239 of the IRDA specifically address?

<p>Trading while being aware of insolvency risks. (B)</p> Signup and view all the answers

Under which provision can orders be made regarding floating charges according to the IRDA?

<p>Section 229 (B)</p> Signup and view all the answers

Flashcards

Unfair or Undue Preference (UUP)

A transaction where a company favoring one creditor over another while in financial distress (liquidation/winding up).

Relevant Time Period (UUP)

The one-year (unrelated) or two-year (connected) period before the company's insolvency, during which a transaction may be challenged as unfair preference.

Transaction at Undervalue (TUV)

A transaction when a company receives significantly less value for something given away while in financial distress (liquidation/winding up).

Presumption of 'influenced by desire to prefer'

In insolvency cases, courts can assume that transactions favoring one party over another were made with the intent to prefer them, in situations where parties are 'connected'

Signup and view all the flashcards

Requirements for Challenging Transactions

Specific criteria that must be met by a given party to successfully challenge a transaction that potentially goes against the interest of related creditors in an insolvency/liquidation case, as per sections 224-227 of the IRDA.

Signup and view all the flashcards

Unfair Presumption (s225(5))

If a connection exists between X and Y, it's presumed unfair, unless proven otherwise.

Signup and view all the flashcards

Court Order Immunity (s225(6))

A court order is not equivalent to immunity in the case of insolvency.

Signup and view all the flashcards

Coincidence of Temporal and Financial Elements (s226)

Both time and financial factors must be present to meet criteria of insolvency.

Signup and view all the flashcards

Inability to Pay Debts (s226(2))

A key factor in determining if a party is insolvent. It involves a failure to fulfill debt payments.

Signup and view all the flashcards

Wrongful Trading (s239 IRDA)

Company activity with no reasonable prospect of success, leading to insolvency.

Signup and view all the flashcards

Fraudulent Trading (s238 IRDA)

Trading with the intent to defraud.

Signup and view all the flashcards

Void Disposition (s130 IRDA)

A transaction that is invalid due to certain circumstances, possibly due to insolvency.

Signup and view all the flashcards

Floating Charges (s229 IRDA)

A type of charge that can be applied to various assets, but it may not be directly related to insolvency.

Signup and view all the flashcards

Personal Liability

An individual can be held responsible for debts or liabilities of a company if they acted wrongfully during its judicial management or winding up.

Signup and view all the flashcards

Wrongful Trading

Trading by a company that is already insolvent, knowing or should have known it was insolvent, causing harm to creditors.

Signup and view all the flashcards

Relief from Personal Liability

A court may partially or entirely relieve a person from personal liability under the IRDA if certain conditions are met, such as acting in good faith.

Signup and view all the flashcards

Conditions for Relief

To be relieved from personal liability, a person must demonstrate they acted in good faith and took all necessary steps to protect the company's interests.

Signup and view all the flashcards

Who Can Apply for Personal Liability?

Any person included in the context of a judicial management or winding up process can apply for personal liability.

Signup and view all the flashcards

Who can be held liable for wrongful trading?

Any individual who was involved in the company's wrongful trading activities, such as directors or senior managers.

Signup and view all the flashcards

Penalties for wrongful trading

Individuals found guilty of wrongful trading face fines up to $10,000, imprisonment of up to 3 years, or both.

Signup and view all the flashcards

Who can apply for a wrongful trading declaration?

The judicial manager or liquidator appointed to oversee the insolvent company, or the Court itself.

Signup and view all the flashcards

Purpose of the wrongful trading declaration

To determine whether specific actions taken by a company during its financial distress constituted wrongful trading.

Signup and view all the flashcards

Who can apply for a declaration of wrongful trading?

Either a company or any individual, with the company's consent, can request the Court to determine if specific actions were wrongful trading.

Signup and view all the flashcards

What actions are considered for a wrongful trading declaration?

Any particular course of conduct, specific transactions, or a series of transactions that occurred before and after the application for a declaration.

Signup and view all the flashcards

Why is seeking a wrongful trading declaration valuable?

It provides legal certainty regarding the nature and legality of the company's actions during its financial distress.

Signup and view all the flashcards

S 239(3) IRDA Order

A court order that can be made alongside a declaration of insolvency under S 239(1) of the IRDA. This order can address debts, charges, and funds received by the company.

Signup and view all the flashcards

Debt/Obligation Due

This refers to any amount of money that the insolvent company owes to a person or entity. The court can order the company to pay this debt as part of the insolvency proceedings.

Signup and view all the flashcards

Charge/Interest on Assets

A charge on assets means that someone has a claim against those assets. The court can order payment of any interest due on those charges.

Signup and view all the flashcards

Provision for Sums Received

The court can order the insolvent company to make provisions for any funds it received before insolvency. This ensures the funds are distributed to the appropriate people or groups.

Signup and view all the flashcards

Defence of Honesty (s239 IRDA)

A defence used in insolvency proceedings, where the company's director can argue that they acted honestly and reasonably, even if their actions led to the company's insolvency.

Signup and view all the flashcards

Unfair Preference (UUP)

A transaction where a company favors one creditor over others while facing financial distress (liquidation/winding up). This can happen when the company gives a benefit to one creditor in an attempt to pay off or gain favor with them, while other creditors may receive less or nothing.

Signup and view all the flashcards

Connected Person

A person who has a close relationship with the company in financial distress, such as a family member, business partner, or someone who has a substantial influence over the company.

Signup and view all the flashcards

"Unable to Pay Debts"

A key factor in determining insolvency. It means failing to fulfill debt payments when due, even after making reasonable efforts to do so.

Signup and view all the flashcards

Presumption of Undue Preference (s225(5), 362(5) IRDA)

A legal principle where a court can automatically assume that a transaction is unfair if it is made between the company and a connected person. This means the burden of proof shifts to the parties involved to show that the transaction was fair and not made with the intention of preferential treatment.

Signup and view all the flashcards

Progen Engineering v Progen Holdings

A case where a company tried to deny that it had desired to prefer a connected person in a transaction, but the court held that simply denying the desire to prefer is not enough to rebut the presumption of undue preference.

Signup and view all the flashcards

Unable to Pay Debts (s226(2))

A critical indicator of insolvency - a company's inability to fulfill its financial obligations.

Signup and view all the flashcards

Relevant Time Period (s226(5))

A specific period before a company's insolvency where transactions are scrutinized as potentially unfair.

Signup and view all the flashcards

Intent to Defraud (s238 IRDA)

A key element of fraudulent trading - a company's intention to deceive or mislead to their own advantage.

Signup and view all the flashcards

What are the penalties for wrongful trading?

A fine of up to $10,000, imprisonment for a term not exceeding 3 years, or both.

Signup and view all the flashcards

What is a wrongful trading declaration?

A legal statement from the court declaring whether a company's conduct during its financial distress constitutes wrongful trading.

Signup and view all the flashcards

Court Guidance on Wrongful Trading

Companies or individuals (with consent) can apply to the court for a declaration on whether their actions constitute wrongful trading.

Signup and view all the flashcards

S 239(6) IRDA: Criminal Liability

This section outlines the criminal penalties for individuals involved in wrongful trading.

Signup and view all the flashcards

Personal Liability for Wrongful Trading

Individuals involved in a company's wrongful trading can be held personally responsible for the company's debts. This means they may have to pay the company's debts themselves.

Signup and view all the flashcards

S 239(1) IRDA: Declaration of Personal Responsibility

A court can declare someone personally responsible for a company's debts if they participated in the wrongful trading that led to the company's insolvency.

Signup and view all the flashcards

S 239(2) IRDA: Relief from Personal Liability

A court can relieve someone from personal liability if they acted honestly and reasonably, even if the company went insolvent.

Signup and view all the flashcards

S 239(3) IRDA Order: Debt/Obligation Due

A court order that can be made alongside a wrongful trading declaration. It directs the insolvent company to pay any outstanding debts it owes to creditors.

Signup and view all the flashcards

S 239(3) IRDA Order: Charge/Interest on Assets

This order can address charges and interest payments on assets owned by the insolvent company. The court can ensure these payments are made during the insolvency process.

Signup and view all the flashcards

S 239(3) IRDA Order: Provision for Sums Received

This order deals with funds received by the company before it went insolvent. The court can order the insolvent company to provide details of these funds and ensure they are distributed correctly.

Signup and view all the flashcards

Study Notes

Avoidance of Antecedent Transactions

  • Unfair or Undue Preference (UUP) requires specific elements to be proven:
    • A preferred party (creditor, surety, guarantor)
    • The insolvent party was insolvent or became insolvent due to the transaction.
    • The insolvent party's actions improved the creditor's position.
    • The insolvent party was influenced to prefer the creditor.
  • Section 224 of the IRDA:
    • Applies where a company is in judicial management or winding up.
    • Allows for challenging transactions at undervalue.
    • Judicial manager/liquidator can apply to court for orders.
    • Court can restore transactions as if they weren't entered into.
    • Transaction is at undervalue if no consideration or less than actual value.
  • Section 226 of the IRDA:
    • Defines the relevant time period for challenging transactions.
    • One year for unrelated parties and two years for connected.
    • Transactions must be within the relevant time period for challenge.
    • If not within these time limits, it is not a factor for consideration.
  • Section 226(2):
    • Applies to cases where a company gives a transaction at undervalue.
    • If a company gives a transaction at undervalue outside these time frames the challenged transaction is invalid.
  • Section 226(3):
    • Presumption for transactions with related parties, unless otherwise stated.
  • Good Faith Defence:
    • Company acted in good faith for business purposes.
    • Reasonable grounds to believe transaction would benefit company.
  • Transaction at Undervalue:
    • Company gives gift to another or no consideration provided.
    • Consideration value is significantly less compared to the given worth.
  • For Bankruptcy of individuals:
    • Presumption of influence to prefer.
  • Company or Individual gave Unfair Preference:
    • Objective: Did the company or individual (Y) provide unfair preference?
      • Subjective: Was company or individual (Y) influenced by desire to prefer (X)?
      • Relevant time ( s 226/363 IRDA).
  • Undervalue transaction and judicial management (or bankruptcy).

Relevant Time Periods

  • One year for unrelated parties.
  • Two years for connected parties.

Fraudulent Trading

  • A declaration can be made if a company's business was conducted fraudulently to defraud creditors.
  • The court can declare that any person knowingly involved in the fraudulent business is personally liable.

Wrongful Trading

  • A company incurs debts without a reasonable prospect of meeting them.
  • This can be personal liability based on whether or not they knew the company was trading wrongfully or if the officer(s) ought, in all circumstances, to have known about the wrongful trading.

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

Related Documents

B24 INV - Antecedent Transactions PDF

Description

This quiz explores the legal concepts surrounding the avoidance of antecedent transactions, focusing on Unfair or Undue Preference (UUP) as defined in the IRDA. It covers the necessary elements for proving UUP, as well as the relevant sections that allow for challenging undervalued transactions in judicial management. Test your understanding of the legal implications and timeframes involved.

More Like This

Antecedent
7 questions

Antecedent

FormidableJubilation1298 avatar
FormidableJubilation1298
Historical Antecedent of Science, Technology, and Society
12 questions

Quiz and Flashcards on Historical Antecedents of Science

EducatedAlliteration avatar
EducatedAlliteration
Antecedent Interventions Flashcards
7 questions

Antecedent Based Approaches Quiz & Flashcards

AvidFoxglove avatar
AvidFoxglove
Antecedent Exercise and Behavior
48 questions

Antecedent Exercise and Behavior

ExceptionalCurl avatar
ExceptionalCurl
Use Quizgecko on...
Browser
Open
Browser
Browser