Insolvency Act · 2022 Revised Edition · Part 7
213. Avoidance of certain floating charges
Official textFrom Attorney General's Chambers, unchanged
This section applies to section 206.
Subject as follows, a floating charge on the company’s undertaking or property created at a relevant time is invalid except to the extent of the aggregate of —
floating charge
“floating charge” means a charge which, as created, was a floating charge, and includes a floating charge within the Companies Act;
the value of so much of the consideration for the creation of the charge as consists of money paid, or goods or services supplied, to the company at the same time as, or after, the creation of the charge;
the value of so much of that consideration as consists of the discharge or reduction, at the same time as, or after, the creation of the charge, of any debt of the company; and
the amount of such interest (if any) as is payable on the amount falling within paragraph (a) or (b) in pursuance of any agreement under which the money was so paid, the goods or services were so supplied or the debt was so discharged or reduced.
Subject to subsection (4), the time at which a floating charge is created by a company is a relevant time for the purposes of this section if the charge is created —
company
“company” means a company incorporated or registered under the Companies Act;
in the case of a charge which is created in favour of a person who is connected with the company, at a time in the period of 2 years ending with the onset of insolvency;
in the case of a charge which is created in favour of any other person, at a time in the period of 12 months ending with the onset of insolvency;
in either case, at a time between the making of a judicial management application in respect of the company and the making of a judicial management order on that application; or
in either case, at a time between the filing with the Court of a copy of notice of intention to appoint a judicial manager and the making of that appointment.
Where a company creates a floating charge at a time mentioned in subsection (3)(b) and the person in favour of whom the charge is created is
Insolvency not connected with the company, that time is not a relevant time for the purposes of this section unless the company —
insolvency
“insolvency”, in relation to a company, includes the approval of a voluntary arrangement or the appointment of a judicial manager;
is at that time unable to pay its debts within the meaning of section 100; or
becomes unable to pay its debts within the meaning of that section in consequence of the transaction under which the charge is created.
For the purposes of subsection (3), the onset of insolvency is —
in a case where this section applies by reason of a judicial manager of a company being appointed by judicial management order, the date on which the judicial management application is made;
in a case where this section applies by reason of a judicial manager of a company being appointed following filing with the
Court of a copy of notice of intention of the appointment, the date on which the copy of the notice is filed;
in a case where this section applies by reason of a judicial manager of a company being appointed otherwise than as mentioned in paragraph (a) or (b), the date on which the appointment takes effect; and
in a case where this section applies by reason of a company going into liquidation at any other time, the date of the commencement of the winding up.
For the purposes of subsection (2)(a), the value of any goods or services supplied by way of consideration for a floating charge is the amount in money which at the time they were supplied could reasonably have been expected to be obtained for supplying the goods or services in the ordinary course of business and on the same terms (apart from the consideration) as those on which they were supplied to the company.
Unenforceability of liens on books etc.
Terms defined in this Act
company
Defined · s 3“company” means a company incorporated or registered under the Companies Act;
Court
Defined · s 3“Court”, in relation to a company, means a court having jurisdiction to wind up the company;
floating charge
Defined · s 3“floating charge” means a charge which, as created, was a floating charge, and includes a floating charge within the Companies Act;
insolvency
Defined · s 3“insolvency”, in relation to a company, includes the approval of a voluntary arrangement or the appointment of a judicial manager;
property
Defined · s 3“property”, in relation to a company, includes money, goods, things in action and every description of property, whether real or personal, and whether in Brunei Darussalam or elsewhere, and also obligations and every description of interest whether present or future or vested or contingent arising out of, or incidental to, property.