Agreements that defeat creditors

Partners may sometimes make an agreement between themselves about property, or sell or transfer ownership of property, so that a partner’s creditors cannot use that property to get their money back. They may do this on purpose, or it may just be the effect of their agreement or property transaction.

The Property (Relationships) Act 1976 says that agreements or transactions that are made with the intent to defeat creditors in this way are void. Agreements or transactions that are not intended to, but have the effect of defeating creditors, are void for a period of two years after they are made.

There are some technical problems with the way this works in practice which we discuss in our more detailed Issues Paper (Part K).

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