What happens if I discover the failing business transferred assets to insiders right before it went under?

Transfers made to insiders, such as family members, related companies, or directors, shortly before a business becomes insolvent can potentially be challenged and unwound as an improper preference or a transfer made for less than fair value, under federal insolvency law and Ontario's general creditor-protection rules. These rules exist precisely to stop an insolvent business from moving assets out of creditors' reach before collapsing.

If you're buying assets from the business, or from a receiver or trustee dealing with what's left, and you discover this kind of prior transfer, it's a real red flag worth raising immediately with the receiver, trustee, or your own lawyer — it may affect what's actually still available to buy, and whether some assets could still be clawed back from wherever they went. Discovering this doesn't create liability for you personally just because you learned about it, but it does warrant careful review of what you are, and aren't, actually purchasing, and whether the remaining assets are what they appear to be.