Section 259NEF | Corporate rescue: debt released shortly after connection arises

(1)This section is to be read with section 259NEB (relevant debt relief circumstances: introductory).

(2)The circumstances in this section are—

(a)the relevant release takes place within 60 days of the payer and a payee becoming connected with one another (within the meaning of section 363 of CTA 2009), and

(b)the corporate rescue conditions are met.

(3)The corporate rescue conditions are—

(a)that the payer and the payee became connected as a result of an arm’s length transaction, and

(b)immediately before the payer and the payee became connected it was reasonable to assume that, without the connection and any arrangements of which the connection forms part, there would be a material risk that at some point within the next 12 months the payee would have been unable to pay its debts.

(4)For the purposes of subsection (3)(b), a payee is unable to pay its debts if—

(a)it is unable to pay its debts as they fall due, or

(b)the value of its assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.