Gene1, a biotech firm, is wholly owned by Steve McGuire, who houses the firm in a large, Victorian- era house in Vancouver. The house belongs to Gene1. Lately, however, the company has been going through some hard times. Its products are not well- received in the market and, in fact,
one of its star pharmaceuticals, which was much touted by stock analysts, fails to receive regulatory approval in Canada from the federal government. Sensing trouble ahead, Gene1's Board of Directors decides to deed the house to McGuire in April for $1000. In May, Gene1 makes an assignment into bankruptcy. The sale of the house will probably be reversed as a settlement. It may also be void as a preference to McGuire, if he is a creditor of the company.

Question

Quizplus · Accepted Answer

The transfer of the house to McGuire for $1000, especially when the company was facing financial difficulties, could be seen as a fraudulent conveyance or preferential transfer, which can be reversed in bankruptcy proceedings to ensure equitable treatment of all creditors.

Gene1, a Biotech Firm, Is Wholly Owned by Steve McGuire