LEGAL BRIEFING: Section 127 Insolvency Act 1986
Bank not liable
Payees are liable to make restitution on cheques under Section 127 of the Insolvency Act 1986 according to the Court of Appeal in Hollicourt (Contracts) Limited v Bank of Ireland [2000].
Section 127 of the Insolvency Act 1986 states that “…In a winding up by the court, any disposition of the company’s property, and any transfer of shares, or alteration in the status of the company’s members made after the commencement of the winding up is, unless the court otherwise orders, void.”
The effect of Section 127 is to invalidate dispositions of a company’s assets after a winding-up petition has been presented to the court, so that the company’s assets are preserved for the benefit of the general body of creditors in the liquidation.
