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Companies Act 1993

Liquidations - Voidable transactions

296: Additional provisions relating to setting aside transactions and charges

You could also call this:

“Rules for protecting innocent buyers when company transactions are cancelled”

When a transaction or order is set aside under section 295, it doesn’t affect the ownership or interest of someone who bought property from someone other than the company. This is true if they paid a fair price and didn’t know how the property came from the company.

If a charge or order is set aside under section 295, it doesn’t affect the ownership or interest of someone who bought property when the charge holder sold it. This applies if they paid a fair price and didn’t know about how the charge was given.

A court can’t make a liquidator take back company property (or its value) if the person who has it can prove three things. First, they acted in good faith when they got it. Second, a reasonable person wouldn’t have thought the company was or would become insolvent. Third, they paid for the property or changed their situation believing the transfer was valid.

The Land Transfer Act 2017 doesn’t limit how this section or sections 292 to 295 work.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM322304.

Topics:
Business > Industry rules
Business > Fair trading
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Part 16 Liquidations
Voidable transactions

296Additional provisions relating to setting aside transactions and charges

  1. The setting aside of a transaction or an order made under section 295 does not affect the title or interest of a person in property which that person has acquired—

  2. from a person other than the company; and
    1. for valuable consideration; and
      1. without knowledge of the circumstances under which the property was acquired from the company.

        1. The setting aside of a charge or an order made under section 295 does not affect the title or interest of a person in property which that person has acquired—

        2. as the result of the exercise of a power of sale by the grantee of the charge; and
          1. for valuable consideration; and
            1. without knowledge of the circumstances relating to the giving of the charge.

              1. A court must not order the recovery of property of a company (or its equivalent value) by a liquidator, whether under this Act, any other enactment, or in law or in equity, if the person from whom recovery is sought (A) proves that when A received the property—

              2. A acted in good faith; and
                1. a reasonable person in A's position would not have suspected, and A did not have reasonable grounds for suspecting, that the company was, or would become, insolvent; and
                  1. A gave value for the property or altered A's position in the reasonably held belief that the transfer of the property to A was valid and would not be set aside.

                    1. Nothing in the Land Transfer Act 2017 restricts the operation of this section or sections 292 to 295.

                    Notes
                    • Section 296(3): replaced, on , by section 31 of the Companies Amendment Act 2006 (2006 No 56).
                    • Section 296(4): amended, on , by section 250 of the Land Transfer Act 2017 (2017 No 30).