Guarantees, indemnities, and suretyship agreements are all included under the term "disposition" and fall under the jurisdiction of section 26 of the Insolvency Act.
A disposition without value refers to the transfer or disposal of property rights for either no compensation or for a consideration that is less than the amount of risk the insolvent incurred in the transaction.
This does not include transfers or disposals ordered by a court.
The Court has the power to nullify a disposition without value if it can be shown that the insolvent's liabilities surpassed its assets immediately after the disposition was made.
If a disposition without value was made by the company more than two years prior to its liquidation and it can be proved that the company's liabilities were greater than its assets at the time of the disposition, a liquidator can apply to the High Court to have the disposition set aside.
If the disposition was made within two years of the company's liquidation and the person who benefited from it cannot demonstrate that the company's assets exceeded its liabilities immediately after the disposition, the liquidator may also apply to the court.
The determination of whether a disposition was made without value hinges on whether the insolvent company obtained any benefit from the disposition.
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