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291A: Meaning of related party
or “Who counts as connected to a company in specific ways”
You could also call this:

“Transactions can be cancelled if a company is struggling financially”

This law talks about when a company’s transactions can be cancelled if the company is in financial trouble. Here’s what you need to know:

A liquidator can cancel a transaction if it meets two conditions:

  1. It’s an “insolvent transaction”, which means:
    • The company couldn’t pay its debts when it made the transaction.
    • The transaction lets someone get more money from the company than they would if the company was being shut down.
  2. The transaction happened within a certain time period:
    • For most transactions, this is 6 months before the company started being shut down.
    • For transactions with people closely connected to the company, it’s 2 years.

Transactions can include things like transferring property, creating charges, taking on obligations, or paying money.

If a transaction happened within the 6-month period, it’s assumed the company couldn’t pay its debts unless proven otherwise.

For ongoing business relationships, all the transactions are treated as one big transaction when deciding if it can be cancelled.

The law also explains exactly when these time periods start and end, depending on how the company started being shut down.

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Next up: 293: Voidable charges

or “When certain charges on company property can be cancelled”
Next

Part 16 Liquidations
Voidable transactions

292Insolvent transaction voidable

  1. A transaction by a company is voidable by the liquidator if it—

  2. is an insolvent transaction; and
    1. is entered into within the restricted period.

      1. A transaction by a company is voidable by the liquidator if it—

      2. is an insolvent transaction; and
        1. is entered into with a related party of the company within the related party period.

          1. An insolvent transaction is a transaction by a company that—

          2. is entered into at a time when the company is unable to pay its due debts; and
            1. enables another person to receive more towards satisfaction of a debt owed by the company than the person would receive, or would be likely to receive, in the company's liquidation.

              1. In this section, transaction means any of the following steps by the company:

              2. conveying or transferring the company's property:
                1. creating a charge over the company's property:
                  1. incurring an obligation:
                    1. undergoing an execution process:
                      1. paying money (including paying money in accordance with a judgment or an order of a court):
                        1. anything done or omitted to be done for the purpose of entering into the transaction or giving effect to it.

                          1. In this section, transaction includes a transaction by a receiver, except a transaction that discharges, whether in part or in full, a liability for which the receiver is personally liable under section 32(1) or (5) of the Receiverships Act 1993 or otherwise personally liable under a contract entered into by the receiver.

                          2. A transaction that is entered into within the restricted period is presumed, unless the contrary is proved, to be entered into at a time when the company is unable to pay its due debts.

                          3. Where—

                          4. a transaction is, for commercial purposes, an integral part of a continuing business relationship (for example, a running account) between a company and a creditor of the company (including a relationship to which other persons are parties); and
                            1. in the course of the relationship, the level of the company's net indebtedness to the creditor is increased and reduced from time to time as the result of a series of transactions forming part of the relationship;
                                1. then—
                              1. subsections (1) and (1A) (as relevant) apply in relation to all the transactions forming part of the relationship as if they together constituted a single transaction; and
                                1. the transaction referred to in paragraph (a) may only be taken to be an insolvent transaction voidable by the liquidator if the effect of applying subsection (1) or (1A) in accordance with paragraph (c) is that the single transaction referred to in paragraph (c) is taken to be an insolvent transaction voidable by the liquidator.

                                  1. For the purposes of subsections (1), (1A), (4A), and (4B), restricted period means—

                                  2. the period of 6 months before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and
                                    1. in the case of a company that was put into liquidation by the court, the period of 6 months before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date on which, and at the time at which, the order of the court was made; and
                                      1. if—the period of 6 months before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date and at the time of the commencement of the liquidation.
                                        1. an application was made to the court to put a company into liquidation; and
                                          1. after the making of the application to the court a liquidator was appointed under section 241(2)(a) or (b),—

                                          2. For the purposes of subsections (1A) and (4B), related party period means—

                                          3. the period of 2 years before the date of commencement of the liquidation together with the period commencing on that date and ending at the time at which the liquidator is appointed; and
                                            1. in the case of a company that was put into liquidation by the court, the period of 2 years before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date on which, and at the time at which, the order was made; and
                                              1. if—the period of 2 years before the making of the application to the court together with the period commencing on the date of the making of that application and ending on the date and at the time of the commencement of the liquidation.
                                                1. an application was made to the court to put a company into liquidation; and
                                                  1. after the making of the application to the court a liquidator was appointed under section 241(2)(a) or (b),—

                                                  2. Repealed
                                                  Compare
                                                  • 1955 No 63 s 309
                                                  • 1980 No 43 s 24(1)
                                                  • 1982 No 152 s 18
                                                  Notes
                                                  • Section 292 heading: replaced, on , by section 27(1) of the Companies Amendment Act 2006 (2006 No 56).
                                                  • Section 292(1): replaced, on , by section 27(2) of the Companies Amendment Act 2006 (2006 No 56).
                                                  • Section 292(1)(b): amended, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                                  • Section 292(1A): inserted, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                                  • Section 292(2): replaced, on , by section 27(2) of the Companies Amendment Act 2006 (2006 No 56).
                                                  • Section 292(3): replaced, on , by section 27(2) of the Companies Amendment Act 2006 (2006 No 56).
                                                  • Section 292(4): replaced, on , by section 27(2) of the Companies Amendment Act 2006 (2006 No 56).
                                                  • Section 292(4): amended, on , by section 7 of the Companies Amendment Act (No 2) 2012 (2012 No 60).
                                                  • Section 292(4A): inserted, on , by section 27(2) of the Companies Amendment Act 2006 (2006 No 56).
                                                  • Section 292(4B): inserted, on , by section 27(2) of the Companies Amendment Act 2006 (2006 No 56).
                                                  • Section 292(4B)(c): amended, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                                  • Section 292(4B)(d): amended, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                                  • Section 292(4C): inserted, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                                  • Section 292(5): amended, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                                  • Section 292(5): amended, on , by section 27(3) of the Companies Amendment Act 2006 (2006 No 56).
                                                  • Section 292(5)(a): replaced, on , by section 8(1) of the Companies Amendment Act 1999 (1999 No 19).
                                                  • Section 292(5)(b): amended, on , by section 8(2)(a) of the Companies Amendment Act 1999 (1999 No 19).
                                                  • Section 292(5)(b): amended, on , by section 12(1) of the Companies Amendment Act 1998 (1998 No 31).
                                                  • Section 292(5)(c): inserted, on , by section 12(1) of the Companies Amendment Act 1998 (1998 No 31).
                                                  • Section 292(5)(c): amended, on , by section 8(2)(b) of the Companies Amendment Act 1999 (1999 No 19).
                                                  • Section 292(5)(c)(ii): amended, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).
                                                  • Section 292(6): repealed, on , by section 3 of the COVID-19 Response (Further Management Measures) Legislation Act 2020 (2020 No 13).