• PART 4: PART 4: PROTECTION OF ASSETS IN LIQUIDATION AND ADMINISTRATION

    • Chapter 1 Chapter 1 — Contraventions by Directors and others

      • 244. Fraud in anticipation of winding-up or insolvent administration

        (1) When a Company is ordered to be wound up by the Court, or passes a resolution for voluntary winding-up or enters insolvent administration, any person, being a past or present officer of the Company, commits a contravention and is liable to a fine at the relevant level set out in the Fines Schedule if, within the twelve (12) months immediately preceding the commencement of the winding-up, he has —
        (a) concealed any part of the Company's property to the value of $200 or more, or concealed any debt due to or from the Company;
        (b) fraudulently removed any part of the Company's property to the value of $200 or more;
        (c) concealed, destroyed, mutilated or falsified any book or paper affecting or relating to the Company's property or affairs;
        (d) made any false entry in any book or paper affecting or relating to the Company's property or affairs;
        (e) fraudulently parted with, altered or made any omission in any document affecting or relating to the Company's property or affairs; or
        (f) pawned, pledged or disposed of any property of the Company which has been obtained on credit and has not been paid for (unless the pawning, pledging or disposal was in the ordinary way of the Company's business),
        in each case with the intention of defrauding the creditors of the Company or concealing the state of affairs of the Company from any person, or to defeat the law.
        (2) Subsection (1) is deemed to also apply to such a person if, within the twelve (12) month period, he has been privy to the doing by others of any of the things mentioned in subsection (1) with the requisite intent.

      • 245. Transactions in fraud of creditors

        (1) When a Company is ordered to be wound up by the Court or passes a resolution for voluntary winding-up or enters insolvent administration, a person commits a contravention and is liable to a fine at the relevant level set out in the Fines Schedule if he, being at the time an officer of the Company —
        (a) has made or caused to be made any gift or transfer of, or charge on, or has caused or connived at the levying of any execution against, the Company's property; or
        (b) has concealed or removed any part of the Company's property since, or within two (2) months before, the date of any unsatisfied judgment or order for the payment of money obtained against the Company.
        (2) A person is not guilty of a contravention if —
        (a) he carried out the conduct under subsection (1)(a) above more than five years before the commencement of the winding-up or entry into insolvent administration; or
        (b) he proves that, at the time of the conduct constituting a breach of these Regulations he had no intent to defraud the Company's creditors.

      • 246. Misconduct in course of winding-up or insolvent administration

        When a Company is being wound up or has entered insolvent administration, a past or present officer of a Company commits a contravention and is liable to a fine at the relevant level set out in the Fines Schedule if he —

        (a) does not to the best of his knowledge and belief fully and truly discover to the liquidator or administrator, as the case may be, all the Company's property, and how and to whom and for what consideration and when the Company disposed of any part of that property (except such part as has been disposed of in the ordinary way of the Company's business);
        (b) does not deliver up to the liquidator or administrator, as the case may be (or as he directs), all such part of the Company's property as is in his custody or under his control, and which he is required by law to deliver up;
        (c) does not deliver up to the liquidator or administrator, as the case may be, (or as he directs) all books and papers in his custody or under his control belonging to the Company and which he is required by law to deliver up;
        (d) knowing or believing that a false debt has been proved by any person in the winding-up or administration, fails to inform the liquidator or administrator, as the case may be, as soon as practicable;
        (e) after the commencement of the winding-up or administration, prevents the production of any book or paper relating to the Company's property or affairs; or
        (f) after the commencement of the winding-up or administration, he attempts to account for any part of the Company's property by fictitious losses or expenses,

        and, except in the case of paragraph (f), he does so with the intention of defrauding creditors of the Company.

      • 247. Falsification of Company's books

        When a Company is being wound up or has entered insolvent administration, an officer or contributory of the Company commits a contravention and is liable to a fine at the relevant level set out in the Fines Schedule if he destroys, mutilates, alters or falsifies any books, papers or securities, or makes or is privy to the making of any false or fraudulent entry in any register, book of account or document belonging to the Company with intent to defraud or deceive any person.

      • 248. Material omissions from statement relating to Company's affairs

        When a Company is being wound up or has entered insolvent administration, any past or present officer of the Company commits a contravention and is liable to a fine at the relevant level set out in the Fines Schedule if he makes any material omission in any statement relating to the Company's affairs (including a Statement of Affairs) with the intention of defrauding the creditors of the Company.

      • 249. False representations to creditors

        Any past or present officer of the Company commits a contravention and is liable to a fine at the relevant level set out in the Fines Schedule if —

        (a) when a Company is being wound up or has entered insolvent administration, he makes any false representation or commits any other fraud for the purpose of obtaining the consent of the Company's creditors or any of them to an agreement with reference to the Company's affairs or to the winding-up or administration; or
        (b) prior to the winding-up or administration, he has made any false representation or committed any other fraud for that purpose.

      • 250. Summary remedy against delinquent officers or liquidators

        (1) Subsection (3) applies if in the course of the winding-up of a Company it appears that a person who —
        (a) is or has been an officer of the Company;
        (b) is a liquidator or administrative receiver of the Company; or
        (c) is or has been concerned, or has taken part in the promotion, formation or management of the Company,
        has misapplied or retained, or become accountable for, any money or other property of the Company, or been guilty of any misfeasance or breach of any fiduciary or other duty in relation to the Company.
        (2) Subsection (1) includes, in the case of a person who has acted as a liquidator of the Company, any misfeasance or breach of any fiduciary duty in connection with the carrying out of his functions as a liquidator of the Company.
        (3) The Court may, on the application of the Registrar, the liquidator or of any creditor or contributory, examine into the conduct of the person falling within subsection (1) and compel him to —
        (a) repay, restore or account for the money or property or any part of it, with interest at such rate as the Court thinks just; or
        (b) contribute such sum to the Company's assets by way of compensation in respect of misfeasance or breach of fiduciary or other duty as the Court thinks just.

      • 251. Fraudulent trading

        (1) If in the course of the winding-up of a Company or while it is in administration it appears that any business of the Company has been carried on with intent to defraud creditors of the Company or creditors of any other person, or for any fraudulent purpose, subsection (2) applies.
        (2) The Court, on the application of the liquidator or the administrator, as the case may be, may declare that any persons who were knowingly parties to the carrying on of the business in the manner mentioned are liable to make such contributions (if any) to the Company's assets as the Court thinks proper.

      • 252. Wrongful trading

        (1) Subject to subsection (3) below, if in the course of the winding-up of a Company or while it is in administration it appears that subsection (2) applies in relation to any person being a past or present Director of the Company, the Court, on the application of the relevant Officeholder, may declare that person is to be liable to make such contribution (if any) to the Company's assets as the Court thinks fit.
        (2) This subsection (2) applies if —
        (a) the Company has gone into an insolvent liquidation or has entered insolvent administration;
        (b) at some time before the commencement of the winding-up of the Company or before the Company entered administration, as the case may be, the person knew or ought to have concluded that there was no reasonable prospect of the Company avoiding going into insolvent liquidation or entering insolvent administration; and
        (c) the person was a Director of the Company at that time.
        (3) Subsection (1) shall not apply to any person if the Court is satisfied that after the Director first knew or ought to have concluded that there was no reasonable prospect of the Company avoiding going into insolvent liquidation, he took every step with a view to minimising the potential loss to the Company's creditors as (on the assumption that the person had knowledge of the matter mentioned in subsection (2)(b)) he ought to have taken.
        (4) For the purposes of this Section, the facts which a Director of the Company ought to know, the conclusions which he ought to reach and the steps which he ought to take are those which would be known, or reached or taken, by a reasonably diligent person having both —
        (a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that Director in relation to the Company (including functions which he does not carry out but which have been entrusted to him); and
        (b) the general knowledge, skill and experience that Director has.
        (5) This Section is without prejudice to Section 251 (Fraudulent trading).
        (6) In this Section, Director includes a shadow director.

      • 253. Proceedings under Sections 251 and 252

        Where the Court makes a declaration under either Section 251 (Fraudulent trading) or Section 252 (Wrongful trading), it has wide powers to give such further directions as it thinks proper for giving effect to the declaration.

    • Chapter 2 Chapter 2 — Powers of Office-holders to obtain information

      • 254. Getting in the Company's property

        (1) This Section applies in the case of a Company where —
        (a) the Company enters administration;
        (b) the Company becomes subject to a Deed of Company Arrangement;
        (c) an administrative receiver is appointed or (but only for the purposes of subsection (4)) a receiver is appointed;
        (d) the Company goes into liquidation; or
        (e) a provisional liquidator is appointed.
        (2) Where any person has in his possession or control any property, books, papers or records to which the Company appears to be entitled, the Court may, on application by the relevant Office-holder, require that person immediately (or within such period as the Court may direct) to pay, deliver, convey, surrender or transfer the property, books, papers or records to the Office-holder.
        (3) If it appears to the Court, on consideration of any evidence obtained pursuant to Section 256 (Inquiry into Company's dealings), that any person is indebted to the Company, the Court may, on the application of the relevant Office-holder, order that person to pay to the Office-holder, at such time and in such manner as the Court may direct, the whole or any part of the amount due, whether in full discharge of the debt or otherwise, as the Court thinks fit.
        (4) Where the Office-holder —
        (a) seizes or disposes of any property which is not property of the Company; and
        (b) at the time of seizure or disposal believes, and has reasonable grounds for believing, that he is entitled (whether in pursuance of an order of the Court or otherwise) to seize or dispose of that property,
        the Office-holder is not liable to any person in respect of any loss or damage resulting from the seizure or disposal (except in so far as that loss or damage is caused by the Office-holder's own negligence), and has a lien on the property, or the proceeds of its sale, for such expenses as were incurred in connection with the seizure or disposal.

      • 255. Duty to co-operate with Office-holder

        (1) Where an Office-holder has been appointed to a Company, he may require any of the persons identified in subsection (2) to —
        (a) give to the Office-holder such information concerning the Company and its promotion, formation, business, dealings, affairs or property as the Office-holder may at any time after the commencement of Insolvency Proceedings reasonably require; and
        (b) attend on the Office-holder at such times as the latter may reasonably require.
        (2) The persons who must co-operate with the Office-holder are —
        (a) those who are or have at any time been a Director or secretary of the Company;
        (b) those who have taken part in the formation of the Company at any time;
        (c) those who are or have been at any time in the employment of the Company;
        (d) those who are or have at any time been a Director or secretary of, or in the employment of, another Company which is or was at any time a Director or secretary of the Company; and
        (e) in the case of a Company being wound up by the Court, any person who has acted as receiver, administrator, administrative receiver, provisional liquidator or liquidator of the Company.
        (3) A person who fails to comply with this Section, without reasonable excuse, commits a contravention and is liable to a fine at the relevant level set out in the Fines Schedule.

      • 256. Inquiry into Company's dealings

        On the application of the Office-holder, the Court may order any person involved with the Company to appear before it or to produce to it or to the Office-holder an account of his dealings with the Company contained in a witness statement verified by a statement of truth including any information concerning the promotion, formation, business, dealings, affairs or property of the Company or any books, papers or records in his possession or under his control relating to the Company or to any such dealings. A person involved with the Company shall include a Director or secretary of the Company, any person known or suspected to have in his possession any property of the Company or supposed to be indebted to the Company and any person whom the Court thinks capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the Company.

    • 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.