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POCA and the Insolvency Act 1986

A recent case concerning the sale of a property at a below-market price has highlighted some of the interaction between part 9 of the Insolvency Act 1986 and POCA 2002.

Under sections 339, 340, 423-425 of the Insolvency Act, certain transactions have the potential to be unwound by a Trustee in bankruptcy where they fall foul of those provisions.

Often, when it comes to selling a property the property will be sold at an undervalue (i.e. for less than the market value). This in order to achieve a quick sale.

Such a transaction would normally fall foul of one of the above-stated sections of the Insolvency Act where the seller was to later become bankrupt. However, under section 417 of POCA, any assets which are subject to a restraint order made under the Act are exempt from the provisions of the Insolvency Act. This means that where a property is being sold for less than the market value pursuant to a restraint order, this transaction cannot fall foul of part 9 of the Insolvency Act.

(note. The position in respect of assets subject to a restraint order where the defendant is already bankrupt is different and does not form part of this article).

Robert Blair, Cohen Cramer Solicitors. 15/08/19

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