Gifting money prior to bankruptcy

[Rabbit73]

Due to the fact that a limited company which I direct is about a month away from going under I may be facing bankruptcy. I personally garauntee a large amount (�130K) of the company's debt.

 

I am however personally due a consultancy fee�40K from a business transaction unrelated to the company which is in difficulty.

 

To avoid this being sequestrated I would like to gift it to my friend who lives in Italy. I would receive the money into my bank, get my bank to issue a bankers draft and pay that into her bank in Italy.

What are the implications of this? Could the courts pursue this money?

 

I

[spammylou]

My husband went bankrupt 2 years ago. you will have to supply your bank accounts to the Official Receiver, so if they check it and find it they will want to know where the money goes. If you don't supply them with the bank info, and they subsequently find out, you could be in big trouble.  Rules on bankrupcy have changed recently too. as it sounds like you are quite likely to go bankrupt for a large amount, they will probably do a bit of digging.  They won't take things away from you however, unless totally necessary. Just be honest, the implications of a worried mind are far worse than being skint and having a clear head. Good luck.

[Rabbit73]

Hi and thanks for your reply. I intend to be completely honest and upfront. I'm just looking to get clarification on the specific issue of "gifting" this money. Clearly it's to avoid surrendering it to the receiver but I'll do it in a very upfront and transparent way. And remeber this will occur a good month or so before I reckon the bankruptcy will happen (if it does at all).

[spammylou]

rabbit, I'm not sure if you realise, but they go over everything that leads up to your bankrupcy, and not so much afterwards! Most people that go bankrupt know they are doing so in advance, so any way of "transferring" things is sometimes sought before it all happens, i.e transferring deeds, car ownership etc.  If you go to your local court they have plenty of free booklets which are really helpful.  I understand where you are coming from though!

[Didwot]

The Insolvency Act 1986 provides the answer to your question. What you are proposing is called a Transaction at an Undervalue, and can be set aside under S339 of the Act. It also sounds like Concealment of Property which is a criminal offence under S354 of the Act. There are several other similar offences as well

[Rabbit73]

Thanks again for both replies. A couple of points...

 

1. Scots law differs in this area varies quite significantly from English and Welsh (I'm based in Scotland). Can you confirm that the Insolvency Act applies up here? If so I'll do the research into it myself

 

2. Didwot claims that my actions would be interpreted  as a "Transaction At An Undervalue" but I'm not so sure this is correct. I'm very familiar with this concept as it's something I've already been warned against in in the past. Basically it's the classic "phoenix" scam, transfering your assets from one company into another for no consideration. Liquidators will often pursue this and can be successful. However, I'm not sure this applies. This is a completely transparent gift of money to a third party who, and this is significant, lives abroad.

She has and never has had any links to this or any of my businesses.

 

I also take on board Spammylou's point about receivers looking at great depth into your past affairs but bear in mind I'm erring on the side of caution here. I'm predicting a "worst case scenario". I've been digging myself out of similar scrapes throughout my entire business career. Bankruptcy is far from inevitable at the moment.

 

Sorry for being pedantic but I need a pretty clear answer as I'm trying to avoid throwing even more questions at my underworked and overpaid accountant! I reckon he's on about �250 for every email of mine he answers!

[Didwot]

In answer to both points.
The bankruptcy provisions of the Insolvency Act do NOT extend to Scotland.
Were they to do so ( and I expect Scottish Law will have similar provisions anyway) Transactions at an Undervalue are expressly defined to include gifts.

[spammylou]

hmmm. in this case (in terms of the costly accountant) save yourself some dough and just get all the relevant information and paperwork from the Scottish insolvency service, guarantee everything you want to know will be in there-you sound clued up enough, so why pay the middle man - especially if bankrupcy is not on the horizon just yet.  Or find an insolvency or bankrupcy specialist.

[zmudge]

The Act which currently applies in Scotland is the Bankruptcy (Scotland) Act 1993. Booklets detailing its provisions can be obtained from the Sheriffdom Office nearest to your home. Generally, gifts are only absolutely safe if made more than six years prior to bankruptcy. If you are unable to clear the �130K a "gift" of �40000 a few months prior to your personal  bankruptcy will almost certainly be regarded as a "trick" and the Court will make every effort to recover it.

The other very important thing that you must bear in mind that if  �40000 arrives in your bank and then leaves for somewhere in Italy shortly afterwards this will trigger a Suspicious Activity Report by your bank about you concerning Money Laundering to the National Criminal Intelligence Service under the Proceeds of Crime Act 2002. They must make the report under duress of severe penalties against themselves if they fail to do so, and the law prohibits them from telling you what they have done.

[Rabbit73]

Thanks again, all your help is very much appreciated. It looks like I'll need to consider an alternative solution for the outstanding payment I'm due.

I take on board spammylou's point about cutting out the middleman (my accountant) but while it would save money I firmly believe that it's in situations like this where an expert, albeit an expensive one, is a big asset. I've been in similar situations before and found this to be true. Bear in mind that while being aware of the law and how it's set out is important, it does not mean that this is how it's going to be applied.

In short what I'm saying is that it's important to have someone who is battling your corner. Don't take anything lying down and don't assume that because an officious civil servant or two bob debt retrieval agency is writing you scary letters threatening all sorts that this is what is going to happen. A good accountant relishes battles like these because firstly it lines their pockets and secondly, in the case of my guy at least, they enjoy the battle of wits. Unless your fully competent in all aspects financial law I believe reatining your accountant in difficult times like these is money well spent.

And how good a resource is this?!!! Wish I'd found it years ago. Thanks for everyone's help and if you've anything to add then I'm all ears....

[erimus1]

Kust for your information, a court, under the Insolvency Act has a re-appropriate property or money that has been disposed of some time before the bankrupcy or insolvency proceedings commence. They have no jurusdiction in Italy though, and so can not get the money back without your assistance. Bare in mind that doing this will be considered by the court to be fraydulent, and therefore you would be likely to go to prison - I know of one person (In Wales - but Scotts law will have same) who would not tell the court where his car, a plot of land, and a fishing boat were, and so has done a total of three years. Not that I condone this, but I once heard of a story of a simillar situation, the guy paid an extremely expensive financial anylist to try and get them out of the s..t and to fabricate a large invoice for x + VAT, They did not do any of the work, but the anylist got a backhander of a couple of grand, plus the money for the VAT he would have to pay on the invoice total - if you worked teh invoice at �40,000 inc. - gave �2,000 backhander and � 5,659.57 for VAT, this would leave you �34,042.55 without anyone knowing - just a thought, but ofcourse I would not condone this.
Good luck with whatever you decide.

[donnahuber5]

In your case you should have to consult first to the lawyer about that situation before you make an action.