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Preferences and Transactions at an Undervalue

During an insolvency, any transactions involving company assets and payments to creditors will be closely scrutinised. If there is a suspicion that assets were disposed of for less than their true value or that certain creditors were wrongly prioritised for repayment, any director held responsible could face serious legal consequences.

At Isadore Goldman, we are highly experienced in supporting directors during these challenging times. We can quickly cut to the heart of the situation, making sure you are clear about your legal position and options. We will advise, guide and represent you, helping to ensure you have the best chance of avoiding a claim or can secure the best outcome if a claim cannot be sidestepped.

The sooner you can get expert support, the better the chances of a positive outcome, so please do not hesitate to contact us for help.

Our expert legal team can support directors with matters including:

  • Transactions at an undervalue
  • Preference claims
  • Other antecedent transactions

We can also assist with many other types of claims against directors during insolvency.

For immediate, practical advice about dealing with claims of transactions at undervalue, please speak to our expert team today. You can get in touch at one of our offices in London, Norwich or Portsmouth or email


Why choose Isadore Goldman for help with claims relating to transactions at an undervalue and preferences?

Independently recognised expertise

Our insolvency law expertise has been confirmed by high-profile client guides including Chambers & Partners and the Legal 500.

Immediate, practical support

When facing a potential claim, directors need the right experts in their corner as soon as possible. We can be available exactly when you need us, so you can have the best defence from the outset.

Plain English legal advice

Given how confusing and stressful insolvency can be, we know the importance of clear advice and guidance. We always explain everything in plain English, avoiding unnecessary legal jargon. That way, you can make decisions with total confidence.

A tactical approach to suit your situation

Every insolvency is different, so we always tailor our approach to the realities of the situation and the outcome you need to achieve. Whether you want to find a fast resolution and avoid court proceedings, or you are determined to fight your corner, we will be there by your side.

Our expertise with transactions at undervalue and preference claims

Transactions at an undervalue

We can advise company directors who are facing claims of transactions at an undervalue or who want reassurance about whether a particular transaction may be open to challenge. Drawing on our high-level expertise, we can ensure that you understand your position and help you to make the right decisions about how to best protect yourself.

Preference claims

Knowing the difference between whether a payment to a creditor was legitimate or may be considered preferential is not always straightforward. Our experts can assess all transactions that an insolvency practitioner would scrutinise and advise on whether they may be open to challenge. You can then take proactive action to protect yourself and the relevant creditor.

Other antecedent transactions

Transactions prior to an insolvency can also be challenged for a number of other reasons and maybe considered antecedent transactions. We can advise on whether any transactions are open to such challenges and, where this is the case, what your best options are.


Common questions about transactions at an undervalue and preference in insolvency

What is an undervalued transaction?

An undervalued transaction or ‘transaction at an undervalue’ is where an asset is transferred from one party to another, either without payment or for a payment that is less than the assets true value. They are also sometimes called ‘transfers at an undervalue’.

What constitutes a transaction at an undervalue is defined by the Insolvency Act 1986.

What happens if a transaction is deemed to be undervalue?

A transaction at an undervalue is considered a voidable transaction, meaning that the liquidator or administrator can seek to have the transaction overturned and the assets returned to the company.

The director responsible for the transaction could also face action by the Insolvency Service, which could have serious personal consequences, such as a fine, director disqualification and even criminal prosecution.

What defence is there for a transaction at an undervalue?

Exactly what defence there may be against claims of a transaction at an undervalue will depend on the circumstances.

It is worth noting that a claim cannot be made if it can be demonstrated that the transaction was entered into in good faith, for legitimate business purposes and that it was reasonable to believe that the transaction would be of benefit to the company.

What is an antecedent transaction in insolvency?

An antecedent transaction is a transaction that occurred before a company went into liquidation or administration that is open to challenge by the liquidator or administrator.

Examples of antecedent transactions include:

  • Transactions at an undervalue
  • Preferential transactions
  • Transactions that defraud creditors
  • Transactions involving misfeasance

What is a preference in payment of creditors?

When it comes to repaying creditors in an insolvency situation, preference refers to a situation where the company has chosen to repay a particular creditor or creditors over and above other creditors without a reasonable justification for doing so.

Who can bring a preference claim?

The liquidator or administrator handling the insolvency can bring a preference claim against the creditor who has been treated preferentially. This can allow the wrongly paid amount to be reclaimed so that it can be properly distributed by the liquidator or administrator.

What is the time limit for preference claims?

The liquidator or administrator can examine any company transactions that occurred within the six months before the company entered formal insolvency proceedings. They can also examine transactions that happened up to two years before insolvency proceedings where the creditor who received payment is connected to or an associate of the company e.g. family members, employees, business partners and directors.

What consequences are there for preference payments in insolvency?

The liquidator or administrator can seek repayment of any preference payments from the creditor who received them. Any director responsible for making a preference payment could also face personal consequences, including a fine, director disqualification and, in the most serious cases, criminal prosecution.

Can a director be disqualified for an undervalue or preference transaction?

Yes, a director can potentially be disqualified as a director for a minimum of two years if they are found to be responsible for a transaction at an undervalue or a preference payment. This is something, therefore, that directors must take very seriously in insolvency proceedings.

There are various defences that could help a director avoid disqualification, even if they are found to be responsible for a preference payment. It is, therefore, highly worth speaking to an expert insolvency lawyer at the earliest opportunity if you are concerned about a claim.

What is an ‘equitable distribution of funds’ in insolvency?

In insolvency law, there is a principle formally known as ‘pari passu’. What this means is that any assets and funds of an insolvent company should be distributed equitably i.e. no unsecured creditor should be treated more favourably than any other.

Contact our experts for help with claims of preference and transactions at an undervalue

For immediate, practical advice about dealing with preference and transactions at undervalue claims, please speak to our expert team today. You can get in touch at one of our offices in London, Norwich or Portsmouth, or email