Remedy
Start free

Section 244: Extortionate credit transactions.

Insolvency Act 1986 · 1986 c. 45View on legislation.gov.uk

Part VI: Miscellaneous Provisions Applying to Companies Which are Insolvent or in Liquidation

This section applies as does section 238, and where the company is, or has been, a party to a transaction for, or involving, the provision of credit to the company.

The court may, on the application of the office-holder, make an order with respect to the transaction if the transaction is or was extortionate and was entered into in the period of 3 years ending with the day on which the company entered administration or went into liquidation.

For the purposes of this section a transaction is extortionate if, having regard to the risk accepted by the person providing the credit—

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
it otherwise grossly contravened ordinary principles of fair dealing;

and it shall be presumed, unless the contrary is proved, that a transaction with respect to which an application is made under this section is or, as the case may be, was extortionate.

An order under this section with respect to any transaction may contain such one or more of the following as the court thinks fit, that is to say—

provision setting aside the whole or part of any obligation created by the transaction,
provision otherwise varying the terms of the transaction or varying the terms on which any security for the purposes of the transaction is held,
provision requiring any person who is or was a party to the transaction to pay to the office-holder any sums paid to that person, by virtue of the transaction, by the company,
provision requiring any person to surrender to the office-holder any property held by him as security for the purposes of the transaction,
provision directing accounts to be taken between any persons.

The powers conferred by this section are exercisable in relation to any transaction concurrently with any powers exercisable in relation to that transaction as a transaction at an undervalue or under section 242 (gratuitious alienations in Scotland).

About this text

This legislation text comes from legislation.gov.uk. Contains public sector information licensed under the Open Government Licence v3.0. These source and reuse terms cover the legislation text, not Remedy's commentary.

Reuse reviewed 21 August 2026 under Open Government Licence v3.0.