Antecedent transactions is a method that is enacted before a company goes through insolvency. A liquidator or administrator can reverse the situation if the company at the time of its making was insolvent. The company’s affair is checked up to two years before the date of insolvency. A company’s director or officer at a senior position tries to protect their financial assets and keep them away from the reach of creditors. Preferential payments are made to these creditors linking to the insolvency of the company which helps in transferring assets of less value or undervalue. The word Antecedent is understood as ‘going before’ or ‘recovery’. General duty of liquidators is to see if any unlawful transaction has been made.
Corporations Act 2001 No 50, 2001-SECT 588FE states that if a company is wounded up in a transaction of the company might be voidable on various grounds
1. If it is an insolvent transaction
2. It was entered into, or an act was done for the determination of giving effect to it
3. During the 6 months ending on the relation- black day.
4. It is an uncommercial transaction, of the company; and
5. The company became a party to the deal for the purpose, or for tenacities including the purpose, of defeating, delaying, or interfering with, the rights of any or all of its creditors on a winding up of the company
This is noticed in the famous case of Solomon v Solomon, where the liquidation process took place lawfully seeking access to justice. It is relevant to understand the role of liquidators in the process of antecedent transactions.
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