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Section 686 of Insolvency Act CAP 53: Power of the Court to set aside certain extortionate credit transactions

    

(1) This section applies to a transaction to which a company is, or has been, a party to a transaction for, or involving, the provision of credit to the company.
(2) The relevant office-holder may apply to the Court for an order under subsection (3) if of the view that such a transaction— (a) is or was extortionate; and
(b) was entered into during the three years immediately preceding the date on which the company entered administration or on which a liquidator was appointed in respect of the company.
(3) If, on the hearing of an application made under subsection (2), the Court is satisfied that the transaction is or was extortionate and was entered into within the period referred to in paragraph (b) of that subsection, it shall make one or more of the following orders—
(a) an order setting aside the whole or part of an obligation created by the transaction;
(b) an order otherwise varying the terms of the transaction or varying the terms on which any security for the purposes of the transaction is held;
(c) an order requiring a person who is or was a party to the transaction to pay to the relevant office-holder any amounts paid to that person by the company in accordance with the transaction;
(d) an order requiring a person to surrender to the office-holder property held by the person as security for the purposes of the transaction;
(e) an order directing accounts to be taken between specified persons.
(4) For the purposes of this section, a transaction is extortionate if, having regard to the risk accepted by the person providing the credit—
(a) the terms of it are or were such as to require grossly exorbitant payments to be made (whether unconditionally or in certain contingencies) in respect of the provision of the credit; or
(b) it otherwise grossly contravened ordinary principles of fair dealing.
(5) A transaction with respect to which an application is made under subsection (2) is, in the absence of evidence to the contrary, presumed to be or to have been extortionate.
(6) The powers conferred by this section are exercisable in relation to a transaction concurrently with any powers exercisable in relation to the transaction as one at an undervalue.

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Disclaimer: This document is not to be taken as legal advise.

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