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Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.
At the time the repayment of the debt was made, was the director (your spouse) aware that the company would be unable to pay its debts as a result of repaying the loan or otherwise was at risk of insolvency or was this not though to be the case at the time but only transpired later due to a bad debt you refer to?
Thanks. In order to understand the position which at first can appear non sensical it is necessary for you to be aware of some legislation which underpins what the administrator is telling you:
Under the provisions of the Insolvency Act if a company within 6 months of insolvency can be shown to have repaid any debts so as to improve one creditors position disproportionateluy to another, then those repayments to the extent that they have disproportionately benefited those credits can be demanded back from the creditors to whom they were paid by the administrator. For connected persons to the company the time period is extended to two years...
The idea behind the law was to prevent directors arranging company affairs when they knew of impending insolvency so that one creditor benefits over another - obvious examples are directors repaying directors loans but not paying company bills or of course here, repaying a spouse but not paying other bills (I do not suggest this was the case - this is just an example of the sort of behaviour the law seeks to restrain).
In addition to the s239(6) of the Insolvency Act states that any connected person to a company is presumed to have been given preferential treatment unless that presumption can be rebutted.
So to summarise the position is that based on the dates you provide the repayment can potentially be reclaimed and the burden of proof is upon you to show that you were not given preferential treatment in order to defend against such a claim by the administrator. How can you do this..?
The first thing you can turn to is any terms that were agreed as part of the loan. If the loan was to be repaid when it was or in deed should have been repaid before it was in fact repaid, then this would be a good starting point to refer to. i.e. you were not given preferential treatment - the loand was due or in deed overdue to be repaid at that time and the company was honouring its obligation.
If you can add to that by showing that at the time the loan was repaid it was not reasonably forseeable that the company was likely to become insolvent and certainly did not do so as a result of repayment of the loan this improves the position further. This is also good evidence in your favour on its own
If you can show one or both of these things then you have the makings of a good defence against the administrators claim. Whilst the administrator is essentially correct in what he is telling you what he is (quite unsuprisingly) likely not telling you is that the Insolvency Act does not say that any payment made to you in the two years before insolvency must be repaid under any circumstances. Rather it says it must be repaid unless you can show that you were not given preferential treatment as above.
Is there anything above I can clarify for you?
A pleasure. I hope you are able to dig out some supportive evidence in your favour to revert to the administrator with.
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