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Companies Act 1993

Liquidations - Recovery in other cases

297: Transactions at undervalue

You could also call this:

“Recovering money from unfair deals made by a company before liquidation”

If you’re a liquidator, you can get money back from someone if a company made a bad deal. Here’s how it works:

You can take back the difference between what the company gave and what it got in return. This applies if the company made the deal within a certain time period, and if the company couldn’t pay its bills when it made the deal or because of the deal.

The time period we’re talking about is usually two years before the company started to be shut down. But if a court was asked to shut down the company, the time period might be different.

‘Transaction’ means the same thing as it does in another part of the law about voidable transactions.

There’s a special rule for deals involving infrastructure funding. If there’s a limit on how much can be recovered under the Infrastructure Funding and Financing Act 2020, this law doesn’t apply to those deals.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM322306.

Topics:
Business > Industry rules
Business > Fair trading
Money and consumer rights > Banking and loans
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298: Transactions for inadequate or excessive consideration with directors and certain other persons, or

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Part 16 Liquidations
Recovery in other cases

297Transactions at undervalue

  1. Under subsection (2) the liquidator may recover from a person (X) the amount C in the formula A − B = C, where—

  2. A is the value that X received from a company under a transaction to which the company was or is a party; and
    1. B is the value (if any) that the company received from X under the transaction.

      1. The liquidator may recover the difference in value (that is, C in the formula in subsection (1)) from X if—

      2. the company entered into the transaction within the specified period; and
        1. either—
          1. the company was unable to pay its due debts when it entered into the transaction; or
            1. the company became unable to pay its due debts as a result of entering into the transaction.

            2. For the purposes of this section,—

            3. transaction has the same meaning as in section 292(3):
              1. specified period means—
                1. 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 of the court 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 paragraph (a) or paragraph (b) of section 241(2),—

                      2. This section does not apply to transactions to which the limit in section 142(2) of the Infrastructure Funding and Financing Act 2020 applies under a levy order made under that Act.

                      Notes
                      • Section 297(1): replaced, on , by section 32(1) of the Companies Amendment Act 2006 (2006 No 56).
                      • Section 297(2): replaced, on , by section 32(1) of the Companies Amendment Act 2006 (2006 No 56).
                      • Section 297(3)(a): replaced, on , by section 32(2) of the Companies Amendment Act 2006 (2006 No 56).
                      • Section 297(3)(b)(i): replaced, on , by section 10(1) of the Companies Amendment Act 1999 (1999 No 19).
                      • Section 297(3)(b)(i): amended, on , by section 32(3) of the Companies Amendment Act 2006 (2006 No 56).
                      • Section 297(3)(b)(ii): amended, on , by section 32(3) of the Companies Amendment Act 2006 (2006 No 56).
                      • Section 297(3)(b)(ii): amended, on , by section 10(2)(a) of the Companies Amendment Act 1999 (1999 No 19).
                      • Section 297(3)(b)(ii): amended, on , by section 14 of the Companies Amendment Act 1998 (1998 No 31).
                      • Section 297(3)(b)(iii): inserted, on , by section 14 of the Companies Amendment Act 1998 (1998 No 31).
                      • Section 297(3)(b)(iii): amended, on , by section 32(3) of the Companies Amendment Act 2006 (2006 No 56).
                      • Section 297(3)(b)(iii): amended, on , by section 10(2)(b) of the Companies Amendment Act 1999 (1999 No 19).
                      • Section 297(4): inserted, on , by section 161 of the Infrastructure Funding and Financing Act 2020 (2020 No 47).