Bermuda—setting aside transactions in the zone of insolvency — 2022
Produced in partnership with Alex Potts QC of Conyers
Last updated on 12/08/2022

The following Restructuring & Insolvency practice note produced in partnership with Alex Potts QC of Conyers provides comprehensive and up to date legal information covering:

  • Bermuda—setting aside transactions in the zone of insolvency
  • What are reviewable transactions?
  • Fraudulent conveyances
  • Fraudulent preferences
  • Floating charges
  • Onerous transactions
  • Post-petition dispositions
  • Unlawful return of capital to shareholders except as authorised by statute
  • Bulk sales

Bermuda—setting aside transactions in the zone of insolvency

What are reviewable transactions?

Payments, transfers of assets, and security transactions can be vulnerable to attack in the event of the company’s insolvency or liquidation.

Reviewable transactions include:

  1. fraudulent conveyances

  2. fraudulent preferences

  3. floating charges

  4. onerous transactions

  5. post-petition dispositions

  6. unlawful return of capital to shareholders except as authorised by statute, and

  7. bulk sales of a business’s entire stock in trade

Fraudulent conveyances

Sections 36A to 36G of the Conveyancing Act 1983 provide that a creditor of a company may be entitled to apply to have a transaction set aside to the extent required to satisfy its claim, provided that the dominant intention of the transaction was to put the property beyond the reach of other creditors and the transaction was entered into for no value or significantly less than the value of the property transferred.

For these purposes, a creditor is one to whom an obligation is owed at the date of the transfer, or to whom it is reasonably foreseeable an obligation will be owed within two years of the date of the transfer, or to whom an obligation is owed pursuant to a cause of action that accrued before or within two years after the date of the transfer.

Fraudulent preferences

Section 237 of the Companies Act 1981 (CA 1981) provides that any conveyance, mortgage, delivery of goods, payment, execution or other act

Related documents:
Key definition:
Insolvency definition
What does Insolvency mean?

This can be defined by two alternative tests (Insolvency Act 1986, s 123):

• cash flow test: a company is solvent if it can pay its debts as they fall due, no matter what the state of its balance sheet (Re Patrick & Lyon Ltd [1933] Ch 786);

• balance sheet test: a company which can pay its debts as they fall due may be insolvent if, according to its balance sheet, liabilities (including contingent liabilities) exceed assets.

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