• Chapter 3 Chapter 3 — Voidable transactions

    • 257. Transactions at an undervalue

      (1) Where a Company is in administration or winding-up and has at a relevant time (as defined in Section 259 (Relevant time)) entered into a transaction with any person at an undervalue, the Court may, on application of the administrator of the Company or the liquidator, make an order restoring the position to what it would have been if the Company had not entered into that transaction.
      (2) A Company enters into a transaction with a person at an undervalue if it —
      (a) makes a gift to that person or otherwise receives no consideration under the transaction; or
      (b) receives consideration under the transaction with a value, in money or money's worth, which is significantly less than the value, in money or money's worth, of the consideration provided by the Company.
      (3) The Court shall not make an order under subsection (1) in respect of a transaction at an undervalue if it is satisfied —
      (a) that the Company which entered into the transaction did so in good faith and for the purpose of carrying on its business; and
      (b) that at the time it did so there were reasonable grounds for believing that the transaction would benefit the Company.
      (4) Where a Company has entered into a transaction at an undervalue with another person and the Court is satisfied the entry into the transaction by the Company was for the purpose of —
      (a) putting assets beyond the reach of a person who is making, or may at some time make a claim against it; or
      (b) otherwise prejudicing the interests of such a person in relation to a claim which he is making or may make,
      the Court may make an order restoring the position to what it would have been if the Company had not entered into that transaction or protecting the interests of any victim of the transaction but having regard to the interests of persons who acquired any interest in property in good faith, for value and without notice of the relevant circumstances.
      (5) An application under subsection (4) shall only be made by a liquidator or administrator of the Company or (with leave of the Court) a victim of the transaction.
      (6) References to a victim of the transaction are to a person who is, or is capable of being, prejudiced by it.

    • 258. Preferences

      (1) Where a Company is in administration or winding-up and has at a relevant time (as defined in Section 259 (Relevant time)) given a preference to any person, the Court may, on application of the administrator of the Company or the liquidator, make an order restoring the position to what it would have been if the Company had not given that preference.
      (2) A Company gives a preference to a person if —
      (a) that person is one of the Company's creditors or a surety or guarantor for any of the Company's debts or other liabilities; and
      (b) the Company does anything or suffers anything to be done which (in either case) has the effect of putting that person into a position which, in the event of the Company going into insolvent liquidation, will be better than the position he would have been in if that thing had not been done.
      (3) The Court shall not make an order under subsection (1) in respect of a preference given to any person unless the Company which gave the preference was influenced in deciding to give it by a desire to put the person in the better position described in subsection (2)(b).
      (4) A Company which has given a preference to a Connected Person (otherwise than by reason only of being its employee) at the time the preference was given is presumed, unless the contrary is shown, to have been influenced in deciding to give it by a desire to put the Connected Person in the better position described in subsection (2)(b).

    • 259. Relevant time

      (1) The time at which a Company enters into a transaction at an undervalue or gives a preference is a "relevant time" if the transaction is entered into, or the preference is given —
      (a) in the case of a transaction at an undervalue or of a preference which is given to a person who is a Connected Person (otherwise than by reason only of being its employee), at a time in the period of two (2) years ending with the onset of insolvency;
      (b) in the case of a preference which is not such a transaction and is not so given, at a time in the period of six (6) months ending with the onset of insolvency;
      (c) in either case, at a time between the making of an administration application in respect of the Company and the making of an administration order on that application;
      (d) in either case, at a time between the filing with the Court of a copy of a notice of intention to appoint an administrator under Part 1 (Administration) and the making of an appointment under that Part; and
      (e) in either case, at a time between the presentation of a petition for the making of a winding-up order in relation to the Company and the making of such an order on that petition.
      (2) Where a Company enters into a transaction at an undervalue or gives a preference at a time mentioned in subsections (1)(a) or (b) above, that time is not a relevant time for the purposes of Sections 257 (Transactions at an undervalue) and 258 (Preferences) unless the Company —
      (a) is at that time unable to pay its debts within the meaning of Section 200 (Definition of inability to pay debts); or
      (b) becomes unable to pay its debts within the meaning of Section 200 (Definition of inability to pay debts) in consequence of the transaction or preference,
      but the requirements of this subsection (2) are presumed to be satisfied, unless the contrary is shown, in relation to any transaction at an undervalue which is entered into by a Company with a person who is a Connected Person.
      (3) In this Part 4 (Protection of Assets in Liquidation and Administration), the "onset of insolvency" means —
      (a) in a case where Section 257 (Transactions at an undervalue) or 258 (Preferences) applies by reason of an administrator of a Company being appointed by an administration order, the date on which the administration application is made;
      (b) in a case where Section 257 (Transactions at an undervalue) or 258 (Preferences) applies by reason of an administrator of a Company being appointed under Part 1 (Administration) following filing with the Court of a copy of a notice of intention to appoint under that Part, the date on which the copy of the notice is filed;
      (c) in a case where Section 257 (Transactions at an undervalue) or 258 (Preferences) applies by reason of an administrator of a Company being appointed otherwise than as mentioned in paragraphs (a) or (b), the date on which the appointment takes effect;
      (d) in a case where Section 257 (Transactions at an undervalue) or 258 (Preferences) applies by reason of a Company going into liquidation at a time when the appointment of an administrator ceases to have effect, the date on which the Company entered administration (or, if relevant, the date on which the application for the administration order was made or a copy of the notice of intention to appoint was filed); and
      (e) in a case where Section 257 (Transactions at an undervalue) or 258 (Preferences) applies by reason of a Company going into liquidation at any other time, the date of the commencement of winding-up.