Ineffective Transactions In Insolvency

Certain kinds of transaction entered into by debtors before insolvency proceedings are initiated against them may be ineffective.

The transactions must be challenged by the insolvency administrator within a year of the decision on bankruptcy taking effect.

The insolvency court then considers whether the transaction was effective and for whose benefit or in whose favour it was entered into.

If the court upholds the challenge, the beneficiary of the transaction is then required to release the relevant assets, which become assets of the insolvency. If release is not possible, the beneficiary (or his successor's in title) must pay compensation.

The transactions which may be challenged by an insolvency administrator are: