Transactions at Undervalue
If your company is struggling and you believe it has no future, you might be tempted to offload some of its assets to another company or an individual.
But before you do, alarm bells should ring. Because you could be at risk of making a transaction at undervalue.
What is a Transaction at Undervalue?
A transaction at undervalue occurs when, in the period leading up to insolvency, a company makes a loss on an asset or sells it for far less than its real value.
- Passing a machine to another company without payment
- Granting access to a client list or company database for free
- Transferring ownership of a company vehicle to an individual for next to nothing
A liquidator or administrator can look back six months and, in some cases, up to 2 years, depending on whether the other person was connected to the business.
What are the potential consequences of Transfers at Undervalue?
The liquidator or administrator can apply to the court for an order reversing the transaction.
Directors held responsible for carrying out transactions at undervalue also face a number of potential consequences, including:
- Personal liability for company debts
- Disqualification as a director
- And, for serious wrongdoing, criminal prosecution
That’s why if your company is heading towards insolvency, you should seek specialist legal advice as soon as possible.
Contact us today for a confidential discussion
Let us help you. We’re based in Milton Keynes but can act for you wherever you are in England or Wales.
If you’re thinking of selling an asset, we can advise you on the steps to take to make sure you keep on the right side of the law.