Insolvency Act 1986, section 240

“Relevant time” under ss. 238, 239

Part VI Miscellaneous Provisions Applying to Companies Which are Insolvent or in Liquidation

(1)Subject to the next subsection, 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 given—

(a)in the case of a transaction at an undervalue or of a preference which is given to a person who is connected with the company (otherwise than by reason only of being its employee), at a time in the period of 2 years ending with the onset of insolvency (which expression is defined below),

(b)F515in the case of a preference which is not such a transaction and is not so given, at a time in the period of 6 months ending with the onset of insolvency,. . .

[F516 (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, and

(d)in either case, at a time between the filing with the court of a copy of notice of intention to appoint an administrator under paragraph 14 or 22 of Schedule B1 and the making of an appointment under that paragraph.F516]

(2)Where a company enters into a transaction at an undervalue or gives a preference at a time mentioned in subsection (1)(a) or (b), that time is not a relevant time for the purposes of section 238 or 239 unless the company—

(a)is at that time unable to pay its debts within the meaning of section 123 in Chapter VI of Part IV, or

(b)becomes unable to pay its debts within the meaning of that section in consequence of the transaction or preference;

but the requirements of this subsection 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 connected with the company.

(3)For the purposes of subsection (1), the onset of insolvency is—

[F517 (a)in a case where section 238 or 239 applies by reason of an administrator of a company being appointed by administration order, the date on which the administration application is made,

(b)in a case where section 238 or 239 applies by reason of an administrator of a company being appointed under paragraph 14 or 22 of Schedule B1 following filing with the court of a copy of a notice of intention to appoint under that paragraph, the date on which the copy of the notice is filed,

(c)in a case where section 238 or 239 applies by reason of an administrator of a company being appointed otherwise than as mentioned in paragraph (a) or (b), the date on which the appointment takes effect,

(d)in a case where section 238 or 239 applies by reason of a company going into liquidation F518... at the 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 238 or 239 applies by reason of a company going into liquidation at any other time, the date of the commencement of the winding up.F517]

Definitions used in section 240 2

the company

2 Section 233B does not apply in relation to a contract for the supply of goods or services to a company (“the company”) where any of paragraphs 3 to 11 applies.

Defined in Sch.4ZZA para.2 · see it in the full Act
administrator

1 (1) For the purposes of this Act “administrator” of a company means a person appointed under this Schedule to manage the company’s affairs, business and property.

Defined in Sch.B1 para.1(1) · see it in the full Act

Cases considering section 240 76

A Company (Number CR-2024-BHM-000012), Re

[2024] EWCA Civ 1436 · 25 November 2024

Applied to explain that the relevant time for specified avoidance provisions is linked to the onset of insolvency and, in relevant cases, the commencement of winding up. (see para [23]) Applied to identify the onset of insolvency as the date of commencement of winding up where compulsory liquidation follows without prior administration. (see para [23])

Darty Holdings SAS v Geoffrey Carton-Kelly

[2023] EWCA Civ 1135 · 9 October 2023Defines

Relates to the relevant-time and insolvency requirements for a preference. The judgment distinguished the time when a preference is actually given from the earlier time when the decision to give it may have been made. (see paras [30]-[32]; [40]-[41]) Defines the relevant time by reference to when the company actually gives the preference, subject to the statutory insolvency requirement. For connected persons, the relevant period extended for two years before the onset of insolvency. (see para [30])

Evans & Anor v Jones & Anor

[2016] EWCA Civ 660 · 7 July 2016

Applied as the condition defining a relevant time for a connected-person preference. The company was unable to pay its debts at each payment date once the contingent unlawful-dividend claim was excluded from its assets (see paras [3]; [22]-[25]).

56 more judgments, and what each says about section 240, are in the case-law panel in the full Act.

Amendments and notes

13 notes from legislation.gov.uk

Amendments

  1. F515Word in s. 240(1)(b) repealed (15.9.2003) by 2002 c. 40, ss. 248(3), 278, 279, Sch. 17 para. 26(3), Sch. 26 (with s. 249(1)-(3)(6)); S.I. 2003/2093, art. 2(1), Sch. 1 (subject to arts. 3-8 (as amended by S.I. 2003/2332, art. 2))
  2. F516S. 240(1)(c)(d) substituted (15.9.2003) for s. 240(1)(c) by 2002 c. 40, ss. 248(3), 279, Sch. 17 para. 26(2) (with s. 249(1)-(3)(6)); S.I. 2003/2093, art. 2(1), Sch. 1 (subject to arts. 3-8 (as amended by S.I. 2003/2332, art. 2))
  3. F517S. 240(3)(a)-(e) substituted (15.9.2003) for s. 240(3)(a)(aa)(b) by 2002 c. 40, ss. 248(3), 279, Sch. 17 para. 26(4) (with s. 249(1)-(3)(6)); S.I. 2003/2093, art. 2(1), Sch. 1 (subject to arts. 3-8 (as amended by S.I. 2003/2332, art. 2))
  4. F518Words in s. 240(3)(d) omitted (31.12.2020) by virtue of The Insolvency (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/146), reg. 1(3), Sch. para. 28 (with regs. 4, 5); 2020 c. 1, Sch. 5 para. 1(1)

Modifications

  1. C794Ss. 238-241 applied (with modifications) (31.1.2019) by Technical and Further Education Act 2017 (c. 19), s. 47(2), Sch. 3; S.I. 2018/1161, reg. 3(c)
  2. C795Ss. 238-241 applied (with modifications) (31.1.2019) by Technical and Further Education Act 2017 (c. 19), s. 47(2), Sch. 4; S.I. 2018/1161, reg. 3(d)
  3. C797Ss. 238-241 applied (with modifications) (15.3.2024) by The Water Industry (Special Administration) Regulations 2024 (S.I. 2024/205), regs. 2(2), 5(1) (with reg. 64)
  4. C805S. 240 applied (with modifications) (4.4.2006) by The Cross Border Insolvency Regulations 2006 (S.I. 2006/1030), reg. 2, Sch. 1 Art. 23 paras. 2, 3
  5. C806S. 240 applied (with modifications) (17.2.2009 for certain purposes, otherwise 21.2.2009) by Banking Act 2009 (c. 1), ss. 103, 263(1)(2) (with s. 247); S.I. 2009/296, arts. 2, 3, Sch. para. 2
  6. C807S. 240 applied (with modifications) (17.2.2009 for certain purposes, otherwise 21.2.2009) by Banking Act 2009 (c. 1), ss. 145, 263(1)(2) (with s. 247); S.I. 2009/296, arts. 2, 3, Sch. para. 3
  7. C808S. 240 applied (with modifications) (6.6.2013) by The Collective Investment in Transferable Securities (Contractual Scheme) Regulations 2013 (S.I. 2013/1388), Pt. 3 reg. 1, Sch. 2 paras. 3, 5 Table (with reg. 24)
  8. C809S. 240 modified (temp.) (retrospective to 27.4.2020) by Corporate Insolvency and Governance Act 2020 (c. 12), Sch. 10 paras. 8(1)(2), 15 (with ss. 2(2), 5(2))
  9. C810S. 240 applied (with modifications) (8.7.2021) by The Payment and Electronic Money Institution Insolvency Regulations 2021 (S.I. 2021/716), regs. 2, 37 (with reg. 5) (as amended (4.1.2024) by S.I. 2023/1399, regs. 1(2), 4, 11)