Section 659

(1) This section applies in the case of a company where -

(a) the company enters administration; or

(b) the company goes into liquidation.

(2) Where the company has at a relevant time entered into a transaction with any person at an undervalue, the liquidator or administrator may apply to the Court for an order under this section.

(3) The Court shall, on such an application, make such order as it deems fit for restoring the position to what it would have been if the company had not entered into that transaction.

(4) For the purposes of this section, a company enters into a transaction with a person at an undervalue if the company -

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

(b) 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.

(5) The Court shall not make an order under this section in respect of a transaction at an undervalue if it is satisfied -

(a) that the company which entered into the transaction did so in good faith and for the purpose of carrying on its business; and

(b) that at the time it did so there were reasonable grounds for believing that the transaction would benefit the company.

(6) Subject to subsection (7), the time at which a company enters into a transaction at an undervalue is a relevant time if the transaction is entered into -

(a) within two years ending with the onset of insolvency as defined in subsection (8);

(b) between the making of an administration application in respect of the company and the making of an administration order on that application; and

(c) between the filing with the Court of a copy of notice of intention to appoint an administrator under sections 456 or 464 of this Act and the making of an appointment under this paragraph.

(7) Where a company enters into a transaction at an undervalue at a time mentioned in subsection (6) (a), that time is not a relevant time for the purposes of this section unless the company -

(a) is at that time unable to pay its debts within the meaning of section 572; 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.

(8) For the purposes of subsection (6), the onset of insolvency is, in a case where this section applies by reason of -

(a) an administrator of a company being appointed by administration order, the date on which the administration application is made;

(b) an administrator of a company being appointed under section 456 or 464 of this Act following filing with the Court of a copy of a notice of intention to appoint under that section, the date on which the copy of the notice is filed;

(c) 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) a company going into liquidation either following conversion of administration into winding up or 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) a company going into liquidation at any other time, the date of the commencement of the winding up.

660. (1) Where anything made or done after the commencement of this Act is void under this Chapter as a fraudulent preference of a person interested in property mortgaged or charged to secure the company's debt, the person preferred shall, without prejudice to any liabilities or rights arising apart from this provision, be subject to the same liabilities, and have the same rights, as if he had undertaken to be personally liable as surety for the debt, to the extent of the charge on the property or the value of his interest, whichever is the less, and the value of the said person's interest shall be determined as at the date of the transaction constituting the fraudulent preference, and shall be determined as if the interest were free of all encumbrances other than those to which the charge for the company's debt was the subject.

(2) Where for the purposes of this section, application is made to the Court with respect to any payment on the ground that the payment was fraudulent preference of a surety or guarantor, the court shall have jurisdiction to determine any questions with respect to the payment arising between the person to whom the payment was made and the surety or guarantor, and to grant relief in respect thereof, though it is not necessary to do so for the purposes of the winding up, and for that purpose may give leave to bring in the surety or guarantor as a third party as in the case of an action for the recovery of the sum paid.

(3|) Subsection (2) applies, with the necessary modifications, in relation to transactions other than the payment of money, as it applies in relation to payments.