VOIDABLE TRANSACTIONS Interpretation for this Part

248.(1) In this Part–

“insolvent liquidation” means a liquidation of a company where the assets of the company are insufficient to pay its liabilities and the expenses of the liquidation;

“insolvency transaction” has the meaning specified in subsection (2);

“officer holder” means–

(a) in the case of a company in administration, its administrator;

and

(b) in the case of a company in liquidation, its liquidator;

“onset of insolvency” means–

(a) the date on which the application for the administration order was filed, where a company is in administration or is in liquidation and the liquidator was appointed by the Court immediately following the discharge of an administration order;

(b) the date on which the application for the appointment of the liquidator was filed, where a company is in liquidation and the liquidator was appointed by the Court in circumstances other than those set out in paragraph (a); or

(c) the date of the appointment of the liquidator, where a company is in liquidation and the liquidator was appointed by the members;

“voidable transaction” means–

(a) an unfair preference;

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(c) a floating charge that is voidable under section 251; and (d) an extortionate credit transaction.

“vulnerability period”, means–

(a) for the purposes of sections 249, 250 and 251–

(i) in the case of a transaction entered into with, or a preference given to, a connected person, the period commencing 2 years prior to the onset of insolvency and ending on the appointment of the administrator or, if the company is in liquidation, the liquidator; and

(ii) in the case of a transaction entered into with, or a preference given to, any other person, the period commencing 6 months prior to the onset of insolvency and ending on the appointment of the administrator or, if the company is in liquidation, the liquidator; and

(b) for the purposes of section 252, the period commencing 5 years prior to the onset of insolvency and ending on the appointment of the administrator or, if the company is in liquidation, the liquidator.

(2) A transaction is an insolvency transaction if–

(a) it is entered into at a time when the company is insolvent; or (b) it causes the company to become insolvent.

(3) For the purposes of subsection (2)–

(a) a company–

(i) is presumed to have been insolvent if, at the time, either of the circumstances specified in section 10(1)(a) applied to it; and

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(ii) was insolvent if, at the time, 10(1)(b)(i) applied to it;

and

(b) section 10(1)(b)(ii) has no application.

(4) This Part applies in respect of–

(a) a company that is in administration; and (b) a company that is in liquidation.

Unfair preferences.

249.(1) Subject to subsection (2), a transaction entered into by a company is an unfair preference given by the company to a creditor if the transaction–

(a) is an insolvency transaction;

(b) is entered into within the vulnerability period; and

(c) has the effect of putting the creditor into a position which, in the event of the company going into insolvent liquidation, would be better than the position he would have been in if the transaction had not been entered into.

(2) A transaction is not an unfair preference if the transaction took place in the ordinary course of business.

(3) A transaction may be an unfair preference notwithstanding that it is entered into pursuant to the order of a court or tribunal in or outside Gibraltar.

(4) Where a transaction entered into by a company within the vulnerability period has the effect specified in subsection (1)(c) in respect of a creditor who is a connected person, unless the contrary is proved, it is presumed that the transaction was an insolvency transaction and that it did not take place in the ordinary course of business.

Undervalue transactions.

250.(1) Subject to subsection (2), a company enters into an undervalue transaction with a person if–

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(a) the company makes a gift to that person or otherwise enters into a transaction with that person on terms that provide for the company to receive no consideration; or

(b) the company enters into a transaction with that person for a consideration the value of which, in money or money’s worth, is significantly less than the value, in money or money’s worth, of the consideration provided by the company; and (c) in either case, the transaction concerned–

(i) is an insolvency transaction; and

(ii) is entered into within the vulnerability period.

(2) A company does not enter into an undervalue transaction with a person if–

(a) the company enters into the transaction in good faith and for the purposes of its business; and

(b) at the time when it enters into the transaction, there were reasonable grounds for believing that the transaction would benefit the company.

(3) A transaction may be an undervalue transaction notwithstanding that it is entered into pursuant to the order of a court or tribunal in or outside Gibraltar.

(4) Where a company enters into a transaction with a connected person within the vulnerability period and the transaction falls within subsection (1)(a) or subsection (1)(b), unless the contrary is proved, it is presumed that–

(a) the transaction was an insolvency transaction; and (b) subsection (2) did not apply to the transaction.

Voidable floating charges.

251.(1) Subject to subsection (2), a floating charge created by a company is voidable if–

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(a) it is created within the vulnerability period; and (b) it is an insolvency transaction.

(2) A floating charge is not voidable to the extent that it secures–

(a) money advanced or paid to the company, or at its direction, at the same time as, or after, the creation of the charge;

(b) the amount of any liability of the company discharged or reduced at the same time as, or after, the creation of the charge;

(c) the value of assets sold or supplied, or services supplied, to the company at the same time as, or after, the creation of the charge; and

(d) the interest, if any, payable on the amount referred to in paragraphs (a) to (c) pursuant to any agreement under which the money was advanced or paid, the liability was discharged or reduced, the assets were sold or supplied or the services were supplied.

(3) For the purposes of this section, where a company creates a floating charge in favour of a connected person within the vulnerability period, unless the contrary is proved, it is presumed that the charge was an insolvency transaction.

(4) For the purposes of subsection (2)(c), the value of assets or services sold or supplied is the amount in money which, at the time they were sold or supplied, could reasonably have been expected to be obtained for the sale or supply of the goods or services in the ordinary course of business and on the same terms, apart from the consideration, as those on which the assets or services were sold or supplied to the company.

Extortionate credit transactions.

252. A transaction entered into by a company within the vulnerability period for, or involving the provision of, credit to the company is an extortionate credit transaction if, having regard to the risk accepted by the person providing the credit–

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(a) the terms of the transaction are or were such as to require grossly exorbitant payments to be made (whether unconditionally or in certain contingencies) in respect of the provision of credit; or

(b) the transaction otherwise grossly contravenes ordinary principles of fair trading.

Orders in respect of voidable transactions.

253.(1) Subject to section 254, where it is satisfied that a transaction entered into by a company is a voidable transaction the Court, on the application of the office holder–

(a) may make an order setting aside the transaction in whole or in part;

(b) in respect of an unfair preference or an undervalue transaction, may make such order as it considers appropriate for restoring the position to what it would have been if the company had not entered into that transaction; and

(c) in respect of an extortionate credit transaction, may by order provide for any one or more of the following–

(i) the variation of the terms of the transaction or the terms on which any security interest for the purposes of the transaction is held;

(ii) the payment by any person who is or was a party to the transaction to the office holder of any sums paid by the company to that person by virtue of the transaction;

(iii) the surrender by any person to the office holder of any asset held by him as security for the purposes of the transaction; and

(iv) the taking of accounts between any persons.