Reviewable Transactions

What is the role of the trustee in bankruptcy?

The trustee in bankruptcy (trustee) is the insolvency practitioner or official receiver who is appointed to deal with oversea the bankrupt’s estate once a bankruptcy order has been made against them.

The trustee will take over the dealings with the bankrupt’s creditors. All assets making up the bankrupt’s estate will vest in the trustee as soon as the bankruptcy order is made. The trustee’s role is to realise the value of the bankruptcy estate assets.

The trustee is equipped with wide-ranging powers to enable him/her to perform this role. For example, amongst other powers, a trustee can:

• Carry on the business of the bankrupt;

• Sell property in the bankruptcy estate;

• Bring or defend legal action relating to the bankruptcy estate; and

• Bring legal proceedings in relation to reviewable transactions – examined below.

Reviewable Transactions

A trustee in bankruptcy may be able to recover monies by reviewing transactions entered into by the bankrupt before the bankruptcy order was made, in accordance with the provisions of the Insolvency Act 1986.

The following are examples of reviewable transactions:

• Transactions at an undervalue – s 339;

• Preferences – s 340;

• Recovery of excessive pension contributions – s 342A;

• Extortionate credit transactions – s 343;

• Transactions defrauding creditors – s 423; and

• The avoidance of general assignments of book debts.

If the trustee in bankruptcy believes there has been a transaction of one of the above descriptions, he/she can apply to court. The court has a wide discretion and is able to undo the effect of a transactions.