Although the Yeovil Glove company

Voidable transaction cases
Main articles: Fraudulent conveyance, Undervalue transaction, Voidable preference, Voidable floating charge, and Unjust enrichment

Since the Fraudulent Conveyances Act 1571, transactions entered into by a bankrupt have been voidable if they would result in assets otherwise available to creditors becoming unduly depleted or particular creditors becoming unjustly enriched.[158] Initially transactions made only with the intention of depriving creditors of assets, or perverting the priorities for order of distribution were vulnerable, while the modern approach of the Insolvency Act 1986 contains more provisions that unwind transactions simply because their effect is deprivation of assets available to creditors. Reminiscent of the 1571 Act, under the Insolvency Act 1986 section 423, a company may recover assets if they were paid away for "significantly less than the value" of the thing, and this was done "for the purpose of" prejudicing other creditors' interests. In Arbuthnot Leasing International Ltd v Havelet Leasing Ltd (No 2)[159] Scott J held that the motive of the company or its directors was irrelevant, so that even though Havelet Leasing Ltd's lawyers had advised (quite wrongly) that their scheme of starting another company and transferring assets to it would be lawful, because the scheme's purpose was to put the assets out of other creditors' reach it breached section 423.

The rule in section 423 applies at any time before insolvency and requires proof of intention to prejudice other creditors, but other provisions have limits set before the date of winding up and require no proof of bad intent. Under section 238, transactions at an undervalue may be avoided regardless of their purpose, but only up to two years before the onset of insolvency.[160] For example, in Phillips v Brewin Dolphin Bell Lawrie Ltd[161] the liquidators of an insolvent company, AJ Bekhor Ltd, claimed rescind the transfer of assets to a subsidiary, whose shares were then purchased by the investment management house Brewin Dolphin for £1. The only other consideration given by Brewin Dolphin was the promise to carry out a lease agreement for computers, which itself was likely to be unwound and therefore worthless. The House of Lords held that the total package of connected transactions could be taken into account to decide whether a transaction was undervalued or not, and held that this one was.

Under IA 1986 section 127 operates to declare every transaction void entered after the presentation of a winding up petition unless it has the approval of the court. In Re Gray’s Inn Construction Co Ltd[162] Buckley LJ held that courts would habitually approve all contracts that were plainly beneficial to a company entered into in good faith and the ordinary course of business. The predominant purpose of the provision is to ensure unsecured creditors are not prejudiced, and the company's assets are not unduly depleted. In this case, however, because a host of transactions honoured by the company's bank, that was in overdraft, between the presentation and the winding up petition being granted meant unprofitable trading, the deals were declared void.[163]
Voidable preferences

The Insolvency Act 1986 section 238 only catches depletion of a company's total assets, rather than simply preferring one creditor at the expense of others.[164] This happens through the creation of security interests, and they may also be unwound on three limited grounds. First, under section 245, any floating charge created up to one year before the onset of insolvency is avoidable at the company's instance if new money was not advanced to the company in return. So a company cannot grant a floating charge to a creditor to secure past advances made by that creditor, unless given at least "at the same time". In Re Shoe Lace Ltd[165] Hoffmann J held that £350,000 advanced in April and May was not close enough to a floating charge created in July to be considered "at the same time". The floating charge could not secure those amounts. Because the context of the legislation was a business one, and in view of the fact that floating charges can be registered up to 21 days after their creation, a few months was far too long. This only rescinds the charge, and not the debt itself, which remains in effect as before but the creditor becomes unsecured.[166] Banks operating accounts for companies in overdraft have an advantage in this respect. Re Yeovil Glove Co Ltd[167] held that if the overall level of debt remains the same, before and after a floating charge is created, and if money turns over by payments of the company in and withdrawals out, the bank's continued extension of credit will continually "harden" their floating charge. Although the Yeovil Glove company was always indebted to the bank before a floating charge was created, and was indebted at the point of insolvency, because it had deposited and withdrawn a greater amount, the bank's floating charge was considered secure.[168]

Voidable transactions

Apart from petitions by the company or creditors, an administrator has the power to move a company into liquidation, carrying out an asset sale, if its attempts at rescue come to an end.[145] If the liquidator is not an administrator, he is appointed by the court usually on the nomination of the majority of creditors.[146] The liquidator can be removed by the same groups.[147] Once in place, the liquidator has the power to do anything set out in sections 160, 165 and Schedule 4 for the purpose of its main duty. This includes bringing legal claims that belonged to the company. This is to realise the value of the company, and distribute the assets. Assets must always be distributed in the order of statutory priority: releasing the claims of fixed security interest holders, paying preferential creditors (the liquidator's expenses, employees and pensions, and the ring fenced fund for unsecured creditors),[148] the floating charge holder, unsecured creditors, deferred debts, and finally shareholders.[149] In the performance of these basic tasks, the liquidator owes its duties to the company, not individual creditors or shareholders.[150] They can be liable for breach of duty by exercising powers for improper purposes (e.g. not distributing money to creditors in the right order,[151]) and may be sued additionally for negligence.[152] As a person in a fiduciary position, he may have no conflict of interest or make secret profits. Nevertheless, liquidators (like administrators and some receivers) can generally be said to have a broad degree of discretion about the conduct of liquidation. They must realise assets to distribute to creditors, and they may attempt to maximise these by bringing new litigation, either to avoid transactions entered into by the insolvent company, or by suing the former directors.
Increasing assets
Litigation by administrators and liquidators may avoid unfair transactions or preferences, and make former directors pay for wrongdoing. But because of a cautious culture, accountants bring few claims.

If a company has gone into an insolvency procedure, one of the objectives of the administrator or liquidator is to increase the assets that are available to distribute to creditors. To ensure fairness and to treat creditors with similar claims equally, UK law creates significant exceptions to some fundamental private law doctrines. The freedom to contract for any consideration, adequate or not,[153] is curtailed as transactions for an undervalue, or anything unregistered or after presentation of a winding up petition may be avoided.[154] The freedom to contract for any security interest[155] is restricted, as a company's attempt to give an undue preference to one creditor over another, particularly a floating charge for no new money, or any charge that is not registered can also be unwound.[156] Furthermore, particularly since the Cork Report's emphasis on increasing the accountability of company directors, practitioners may sue directors by summary procedure for breach of duties, especially negligence or conflicts of interest. Encroaching on limited liability and separate personality,[157] a specific, insolvency related claim was created in 1986 named wrongful trading, so if a director failed to put a company into an insolvency procedure, and ran up extra debts, when a reasonable director would have, he can be made liable to contribute to the company's assets. Any intentional wrongdoing and fraud is always dealt with strictly, yet a variety of claims exist without any such proof so as prevent unjust enrichment of selected creditor at others' expense and deter wrongdoing.
Voidable transactions

Main articles: Liquidation and Chapter 7, Title 11, United States Code

Main articles: Receivership, English property law, and Mortgages in English law

For businesses where floating charges were created before 2003, and in eight types of corporate insolvencies in the Insolvency Act 1986, sections 72B to 72GA, an older procedure of administrative receivership remains available. These companies are capital market investments; public-private partnerships with step in rights; utility projects; urban regeneration projects; large project finance with step in rights;[121] financial market, system and collateral security charges; registered social landlords; and rail and water companies. Until the Enterprise Act 2002, creditors who had contracted for a security interest over a whole company could appoint their own representative to seize and take a company's assets, owing minimal duties to other creditors. Initially this was a right based purely in the common law of property. The Law of Property Act 1925 gave the holder of any mortgage an incidental power to sell the secured property once the power became exercisable. The receiver was appointable and removable only by, and solely the agent of, the mortgagee.[122] In companies, secured lenders who had taken a floating charge over all the assets of a company also contracted for the right upon insolvency to manage the business: the appointed person was called a "receiver and manager" or an "administrative receiver".[123] The Insolvency Act 1986 amended the law so as to codify and raise the administrative receiver's duties. All receivers had a duty to keep and show accounts,[124] and administrative receivers had to keep unsecured creditors informed, and file a report at Companies House.[125] By default, he would be personally liable for contracts that he adopted while he ran the business.[126] For employment contracts he could not contract liability if he kept employees working for over 14 days.[127] However, the administrative receiver could always be reimbursed for these costs out of the company's assets,[128] and he would have virtually absolute management powers to control the company in the sole interest of the floating charge holder.

The basic duty of the receiver was to realise value for the floating charge holder, although all preferential debts, or those with priority, would have to be paid.[129] For other unsecured creditors, the possibility of recovering money was remote. The floating owed no duty to other creditors with regard to the timing of the appointment of a receiver, even if it could have an effect on negotiations for refinancing the business.[130] It was accepted that a receiver had a duty to act only for the proper purpose of realising debts, and not for some ulterior motive. In Downsview Nominees Ltd v First City Corp Ltd,[131] a company had given floating charges to two banks (Westpac first, and First City Corp second). The directors, wishing to install a friendly figure in control asked Westpac to assign its floating charge to their friend Mr Russell, who proceeded to run the business with further losses of $500,000, and refused to pass control to First City Corp, even though they offered the company discharge of all the money owed under the first debenture. The Privy Council advised that Mr Russell, as administrative receiver, had acted for an improper purpose by refusing this deal. A further case of breach of duty occurred in Medforth v Blake[132] where the administrative receiver of a pig farm ignored the formers owner's advice on how to get discounts on pig food of £1000 a week. As a result, larger debts were run up, and Sir Richard Scott VC held this was a breach of an equitable duty of exercising due diligence. However, a more general duty to creditors was tightly constrained, and general liability for professional negligence was denied to exist. In Silven Properties Ltd v Royal Bank of Scotland[133] a receiver of a property business failed to apply for planning permission on houses that could have significantly raised their value, and did not find tenants for the vacant properties, before selling them. It was alleged that the sales were at an undervalue, but the Court of Appeal held that the receiver's power of sale was exercisable without incurring any undue expense. Everything was subordinate to the duty to the receiver to realise a good price.[134] In this respect, an administrator is not capable of disregarding other creditors, at least in law. One of the reasons for the partial abolition of administrative receivership was that after the receiver had performed his task of realising assets for the floating charge holder, very little value was left in the company for other creditors. Ordinarily, once the receiver's work was done, the company would go into liquidation.
Liquidation
Main articles: Liquidation and Chapter 7, Title 11, United States Code
Disused assets of a liquidating business require buyers, but ultimately the government bears the cost of cleaning up. Battersea Power Station was decommissioned by the CEGB in 1975, and a series of private buyers since 1986 have abandoned their projects or gone into administration.