Protected transactions, Financial Accounting

Protected transactions

These fall into three categories:

(A) Under Section 50:

  • Payments by the bankrupt to creditors;
  • Payments or deliveries to the bankrupt;
  • Conveyances or assignments by the bankrupt for value; provided that:
  • Other contracts, dealings or transactions by or with the bankrupt for value;


Provided that:

(1) The transaction took place before the date of receiving order, and
(2) The other party did not notice of an available act of bankruptcy.

(B) Under Section 51:

Any payment or delivery to the bankrupt or his assignee,

  • Before the date of the receiving order,
  • Without notice of presentation of the petition, and
  • Either pursuant to the ordinary course of business or otherwise bona—fide.


This includes payments made to a third party "on the request, order or direction of the bankrupt" (Re Dalton)

(D) Payment or transfer of money or property of the bankrupt by a person in possession of it to some other person, after the date, but before the gazetting, of the receiving order, provided that the transferor had no notice of the receiving order.

Such a transaction is not completely protected - but no claim can be made against the transferor unless it is "not reasonably practicable" for the trustee to recover it from the transferee.

Posted Date: 12/13/2012 12:29:58 AM | Location : United States

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