Quizzes & Puzzles8 mins ago
Gifting money prior to bankruptcy
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
Answers
No best answer has yet been selected by Rabbit73. Once a best answer has been selected, it will be shown here.
For more on marking an answer as the "Best Answer", please visit our FAQ.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!
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.
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....
Good luck with whatever you decide.
Related Questions
Sorry, we can't find any related questions. Try using the search bar at the top of the page to search for some keywords, or choose a topic and submit your own question.