A Practical Guide to Antecedent Transactions in Insolvency

When a company or individual becomes insolvent, earlier payments, asset transfers and new security can be challenged if they unfairly reduced what's left for creditors.

At Isadore Goldman, we deal exclusively with insolvency. This guide explains antecedent transactions under the Insolvency Act 1986 (IA 1986), including time limits, remedies and defences.

What are antecedent transactions?

An antecedent transaction is one made before formal insolvency that can later be unwound. They're also called voidable antecedent transactions, reviewable transactions or voidable transactions, and recovering value this way is known as clawback. Insolvency law uses them to protect pari passu distribution (unsecured creditors sharing equally) and preserve the estate.

The rules on antecedent transactions (Insolvency Act 1986, Parts VI, IX and XVI, available on legislation.gov.uk) cover transactions at an undervalue, preferences, transactions defrauding creditors, extortionate credit transactions and invalid floating charges.

Most claims are brought by a liquidator, administrator or trustee in bankruptcy, although under section 423 a victim can also apply, even without a formal insolvency.

What is a transaction at an undervalue? (sections 238 and 339)

A transaction at an undervalue happens when a company (section 238 Insolvency Act) or an individual (section 339) makes a gift, receives no consideration, or receives significantly less in value than it provides. For individuals, a transaction in consideration of marriage or civil partnership can also count.

For companies, a transaction at undervalue Insolvency Act claim reaches back two years from the onset of insolvency. The company must have been insolvent at the time or become so as a result, which is presumed for connected parties.

For individuals, the transaction at an undervalue time limit is five years ending with the bankruptcy application or petition. Insolvency only needs showing for transactions more than two years before that date, and is presumed for associates.

Under section 238(5), companies have a defence if they acted in good faith, for the purpose of carrying on business, with reasonable grounds to believe the transaction would benefit them. Individuals have no equivalent. Our team advises on preferences and transactions at an undervalue for office-holders and directors.

What is a preference in insolvency? (sections 239 and 340)

A preference arises when an insolvent company or individual puts a creditor, surety or guarantor in a better position in the insolvency than they would otherwise have been. A common preference payment insolvency scenario is repaying a director-guaranteed bank debt ahead of other creditors.

The central element of an Insolvency Act 1986 section 239 preference claim is "desire". The debtor must have been influenced by a desire to improve the creditor's position, not merely known that it would (Re MC Bacon Ltd). Paying under genuine commercial pressure may not be a preference.

The relevant time is six months ending with the onset of insolvency, or two years for connected persons (for individuals, associates). For connected recipients other than employees, desire is presumed.

Office-holders often recover preference payments: Insolvency Act claims under section 239 Insolvency Act 1986 are among the most common. You may also see the term voidable preference; insolvency practitioners in Scotland use unfair preference (Insolvency Act 1986, section 243).

What are transactions defrauding creditors? (section 423)

Section 423 Insolvency Act claims are the widest, needing no formal insolvency and having no fixed lookback period.

It applies to a transaction at an undervalue made for the purpose (or one of the purposes) of putting assets beyond a creditor's reach or otherwise prejudicing them, judged by the debtor's actual purpose.

Claims can be brought by an office-holder or a victim (anyone who is, or could be, prejudiced). Once the debtor is bankrupt, in liquidation or in administration, a victim needs the court's permission. Section 425 gives the court broad powers, and these claims often accompany wrongful and fraudulent trading allegations.

What are extortionate credit transactions? (sections 244 and 343)

An office-holder can challenge credit given in the three years before administration or liquidation (section 244) or bankruptcy (section 343) where, given the lender's risk, the terms required grossly exorbitant payments or grossly contravened ordinary principles of fair dealing.

It's presumed extortionate unless the lender proves otherwise, yet extortionate credit transactions claims are rare, as hard bargaining won't meet the threshold. Lenders facing a challenge can speak to our lender and creditor services team.

When is a floating charge invalid? (section 245)

In a liquidation or administration, a floating charge created within the relevant time is invalid except to the extent of new value (money, goods or services supplied, or a debt discharged or reduced) given at or after its creation.

The relevant time is 12 months before the onset of insolvency for unconnected chargeholders (only if the company was insolvent then or became so as a result), or two years for connected persons, regardless of solvency. An invalid floating charge is void without a court order, though proceedings may be needed to establish the new value.

What are the time limits for antecedent transactions?

For companies, "onset of insolvency" is defined in section 240 IA 1986. In an administration, it's generally the application date or when a notice of intention to appoint was filed. In a liquidation, it's the commencement of the winding up (for compulsory liquidation, the petition date), or the start of any administration it immediately follows. For individuals, it's the bankruptcy application or petition.

Limitation is separate. Claims under sections 238 and 239 were long treated as having 12 years to set a transaction aside, or six years for money claims (Re Priory Garage (Walthamstow) Ltd). In THG plc v Zedra Trust Company (Jersey) Ltd [2026] UKSC 6, a Supreme Court majority indicated those authorities were wrongly decided, and it's now arguable some claims have no statutory limitation period. Don't assume an old transaction is out of time.

What remedies can the court order?

Under sections 241, 342 and 425, the court can order property to be returned to the estate, security released, recipients to make payments and the pre-transaction position restored.

Third parties who acquired property in good faith and for value are protected, though good faith can be presumed lacking if they were connected or knew of the circumstances and proceedings. Delay makes assets harder to trace.

What should insolvency practitioners consider?

In liquidations and administrations, Statement of Insolvency Practice 2 (SIP 2) requires appropriate investigation: reviewing books, bank statements and board minutes, and mapping connected parties early.

Liquidators and administrators can assign certain claims, including under sections 238, 239 and 244, using section 246ZD IA 1986. After-the-event (ATE) insurance and third-party funding can make uneconomic claims viable, but evidence, the defendant's means and likely recovery need honest assessment first.

Our insolvency practitioners team and litigation and disputes solicitors support office-holders challenging antecedent transactions, from investigation to recovery.

How can you defend an antecedent transaction claim?

In preference claims, evidence of creditor pressure, board minutes and commercial correspondence can show a payment wasn't influenced by a desire to prefer. The section 238(5) defence needs expert valuation evidence and records of the board's reasoning at the time. Solvency is often disputed using management and filed accounts and auditor correspondence, and limitation may help for older transactions, though it's less certain after Zedra.

Antecedent transactions can also feature in a director disqualification investigation. Our claims against directors team advises on every defence.

How can directors avoid creditor preference in insolvency?

Treat creditors even-handedly once the company is struggling, don't repay connected parties or guaranteed debts first, and record the commercial reason for each payment.

Speak to our solicitors about antecedent transactions

Isadore Goldman is a boutique law firm dealing exclusively with insolvency, bankruptcy and restructuring. We act for insolvency practitioners, lenders, creditors and directors, and advise on cross-border and international insolvency matters.

We have offices in London, Norwich, Birmingham and Portsmouth. To arrange an appointment, email info@isadoregoldman.com.