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Notes for Guidance - Bankruptcy (Scotland) Act 2016 (as amended)

This guidance describes the general functions of Accountant in Bankruptcy, interim trustees, trustees and commissioners in relation to their responsibilities regarding bankruptcies which started on or after 30 November 2016.

9.1 Gratuitous alienation

An alienation may be deemed to be gratuitous if it involves a voluntary transfer by the debtor of any property, or right, to another person for no valuable consideration or for a consideration which was of significantly less value than the transferred asset.

The statutory challenge is available provided the alienation was effective on:

  • a date within five years of the date of bankruptcy; or
  • of the debtor’s death in the case of a deceased debtor; and
  • if the alienation was to an associate of the debtor, as defined in Section 229 of the Act

If the alienation was to a person who is not an associate of the debtor, the time limit is two years prior to the date of bankruptcy etc.

The only defences to a statutory challenge of a gratuitous alienation are:

  • immediately, or at any time since the date of the alienation, the debtor was absolutely solvent
  • the alienation was for adequate consideration
  • the alienation was a reasonable birthday, Christmas or other conventional gift
  • the alienation was a reasonable charitable donation made to a person who was not an associate of the debtor

In a statutory challenge the burden of proof is on the person seeking to uphold the transaction. When the statutory challenge is not available, a challenge of common law remains possible but here the burden of proof rests on the challenger.

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