Business

Antecedent and Loan Account Claims

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When a business enters insolvency, the liquidator, administrator or insolvency practitioner will look at any transactions that were made prior to the company's insolvency date, for up to two years beforehand. If any transactions are found that were either made after the business became insolvent, or are found to have caused the insolvency, they are known as antecedent transactions and can sometimes be reversed in order to pay creditors some or all of what they are owed.

In a similar way, a director's loan (when a director takes money out of the business and therefore owes the sum to the company) can become overdrawn if the company is not performing as profitably as expected and the money is not repaid by the director. This can have tax implications but also means that if the company becomes insolvent, the loan will be called in so that creditors can be repaid. Legal action can be taken in regard to the loan account to ensure that the money is repaid and there can be serious consequences for directors if their conduct in the lead up to the insolvency is deemed not to meet acceptable standards.

Funds recovered from either reversing antecedent transactions or recovering loan accounts will be used to pay creditors of the insolvent company.

At Forbes, our specialist insolvency solicitors can support insolvency practitioners to make successful claims of this nature, helping to release the funds needed to give creditors some return for what they are owed.

What is meant by an antecedent transaction?

There are several different scenarios that could mean a transaction is considered antecedent for up to two years prior to the insolvency. These include, but are not limited to:

If preferential payments are made - such as if one creditor is paid and is therefore in a more beneficial or 'preferential' position than other creditors. This could be a transfer of assets as well as a financial transaction.
If transactions are at an undervalue - meaning if assets are transferred out in return for much lower than the market value, thus depriving the business of the funds that a fair market value would bring.
Wrongful trading - if the company carries on trading when it knows that it will become insolvent, as this is potentially depriving creditors of their return.
Fraudulent trading - if the business trades while knowingly misleading or defrauding creditors.
Disposal of property - if the business disposes of property before becoming insolvent so that the property cannot be an asset used to repay creditors.

If you want specialist legal assistance with antecedent transactions or loan account claims in relation to a business insolvency, the team at Forbes can help. Get in touch to find out more.