BELIZE Law and Practice Contributed by: Tim Prudhoe, Nadia Chiesa and Lemelko Missick, Stanbrook Prudhoe
8.2 Claims to Set Aside or Annul a Transaction or a Transfer
• was made while the debtor was insolvent or caused insolvency (Sections 236 (2) and 416 (2)); • gave one creditor an unfair preference over others (Sections 237 and 417); • was at undervalue, meaning the debtor received little or no consideration (Sections 238 and 418); or • involved extortionate credit or voidable charges/ assignments (Sections 239–240 and 419–420). Even if the transaction was contractually required or ordered by a court, it can still be voidable (Sections 237 (3) and 417 (3)). The relationship between the debtor and the other party matters. Transactions with connected persons (such as relatives, affiliates or directors) are treated more strictly, where: • there is a presumption that the transaction was not in the ordinary course of business and is therefore voidable (Sections 237 (4) and 417 (4)); and • good-faith purchasers or recipients for value are protected and cannot be forced to repay or lose property unless they were parties to the transaction or knew of the insolvency (Sections 242 (2)–(4) and 422 (2)–(4)). The Act sets specific timeframes, known as look- back or vulnerability periods, during which certain transactions can be challenged. Under Section 236 (1) for companies and Section 416 (1) for individu - als, transactions made with connected persons can be set aside if they occurred within two years before the onset of insolvency. Transactions involving other, non-connected persons may be challenged if they took place within six months before insolvency. In the case of extortionate credit transactions, the look-back period extends to five years prior to the commence - ment of insolvency proceedings.
Only the insolvency officeholder, that is, the liquidator, administrator or bankruptcy trustee, can bring a claim to set aside or annul a transaction. For companies, this is set out in Section 241 (1) of the Act, which says that “the High Court, on the applica - tion of the office holder, may make an order in respect of a voidable transaction”. For individuals, Section 421 (1) of the Act provides that “the High Court, on the application of the bank - ruptcy trustee of the individual, may make an order in respect of a voidable transaction”. This means indi - vidual creditors cannot file such claims directly; only the appointed insolvency practitioner can. These avoidance provisions fall under Part VII (Void - able Transactions) for companies and Part XV (Void - able Transactions) for bankrupt individuals. They apply mainly during formal insolvency proceedings such as liquidation or bankruptcy, not during creditors’ arrangements or simplified debt restructuring under Part XI. If a claim succeeds, Section 241 (2) (for companies) and Section 421 (2) (for individuals) empower the High Court to: • cancel or reverse the transaction; • order repayment or return of property to the liqui - dator or trustee; and • restore the position to what it would have been if the transaction had not occurred. The recovered property or money becomes part of the insolvency estate, to be distributed among all creditors according to statutory priority – not returned directly to the individual who initiated or benefitted from the claim.
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