Transactions at undervalue

If an insolvent company made a gift or was involved in a transaction where the company either received no payment or a payment that was significantly less than the true value, a Court application can be made to set aside the transaction. This applies if the relevant transaction was entered into within two years prior to the company entering administration or liquidation and if the company was unable to pay its debts at the time of the transaction or that the transaction itself led to the company being unable to pay its debts.

A liquidator or administrator acting for an insolvent company can make a Court application to set aside any transaction at an undervalue.

The remedies available to the Court are the same as those that apply to preference transactions (see above).

The application will be rejected if the company entered into the transaction in good faith for business reasons and that reasonable grounds existed that the transaction would be beneficial to the company.