When you supply goods or render services to a business that subsequently goes into some form of external administration, it can be a difficult time for everyone involved. You may not have been paid everything you were owed, employees may have lost their jobs and the business may not have sufficient funds remaining to enable a proper investigation into the affairs of the business.
If the business does go into liquidation or bankruptcy and you were paid (in part) for some of these goods or services supplied, it is possible that you may receive a demand from the Liquidator or Registered Trustee in Bankruptcy for repayment of these monies, as a voidable transaction. This may appear unfair, particularly where you provided valuable services to the business and you were merely paid for those services.
A voidable transaction may be clawed-back by a Liquidator or Registered Trustee in Bankruptcy where the transaction (ie the payment for goods or services provided by you) occurred at a time when the business was insolvent and you knew, or should have known that the business was showing signs of insolvency. Typically, a Liquidator or Registered Trustee in Bankruptcy may only look back 6 months from the date of their appointment, however, this is not always the case, as demonstrated by our graph.
We believe that defending a claim from a Liquidator or Registered Trustee in Bankruptcy for a voidable transaction should be the last resort, and will work with you to mitigate the risk of you receiving one of these demands.
However, in the event you do receive a demand, SV Voidables can help you. SV Voidables is a national first service, providing litigation support, expert and investigation services in recovering or defending voidable transactions.
What may cause a voidable transaction to arise?
- A voidable transaction can take various different forms, ranging from unfair preferences to uncommercial transactions and voiding of security interests registered outside the prescribed time. Visit our FAQ’s on voidables for more information
- Where you receive monies or assets at a time when the business was insolvent
- The assets were transferred to you at an undervalue or your provided no consideration
- If you receive more from the transaction then if you never received the transaction and proved in the Liquidation or bankruptcy
- If you receive payment for goods, but you knew or ought to have known that the business was insolvent. Be aware of the possible indicators of insolvency
- You purchase the business, but offset the purchase price by assuming some (but not all) of the businesses liabilities
What may be the expected outcomes from receiving a demand for voidable transactions?
- Respond to the demand, denying your liability and putting the Liquidator or Bankruptcy Trustee to proof of their claim
- The main defence to a voidable transaction is that you received the transaction in good faith. Meaning that there was valuable consideration, you acted in good faith and you did not know, or could not reasonably have known, that the business was insolvent.
- However, there are approximately up to 20 other possible defences to voidable transactions (depending on the type of voidable claim)
- Attempt to settle the matter with the Liquidator or Registered Trustee in Bankruptcy
- Put your head in the sand, and hope that the Liquidator or Registered Trustee in Bankruptcy goes away
- Leave it to a court to determine
- Mitigate your risk of receiving a demand in the future
How can SV Partners help?
If you are in the situation where you receive a demand from a Liquidator or Registered Trustee in Bankruptcy for repayment of monies, SV Voidables can help you. We will assess your situation and talk you through your options.
Our role is to help provide objective and practical solutions tailored to your situation to mitigate the risk of you receiving such a demand in the first place, or to mitigate your loss should you receive such a demand.
If you have questions about voidable transactions or about why you received a demand from a Liquidator or Registered Trustee in Bankruptcy, visit our FAQ section, or speak with an expert on our confidential assist line on 1800 246 801.