Rescue, Rehabilitation and Insolvency (Corporate and Personal) Act 2026 · As enacted · Part XV
412. Voidable preference
Official English translation. Where it differs from the Sinhala or Tamil text, the Act itself says which text prevails.
Official translationFrom Department of Government Printing, unchanged
A transaction by a debtor may be set aside by the court on the application of a relevant office holder where it –
is entered into at a time when the debtor is insolvent;
enables a person to receive more towards the satisfaction of a debt by the debtor than that person would receive, or would be likely to receive, in a bankruptcy or liquidation of the debtor; and
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either –
if entered into with a person other than a connected party of the debtor, was entered into within the standard review period; or
if entered into with a connected party of the debtor, was entered into within the connected party review period.
For the purposes of subsection (1), a transaction that is entered into within the standard review period is presumed, unless the contrary is proved, to be entered into at a time when the debtor is insolvent.
Where –
a transaction is, for commercial purposes, an integral part of a continuing business relationship such as a running account between a debtor and a creditor, including a relationship to which other persons are parties; and
in the course of the relationship, the level of the debtor’s net indebtedness to the creditor is increased and decreased from time to time as it constitutes a series of transactions forming part of the relationship;
considering paragraph (b), subsection (1) applies in relation to all of the transactions forming part of the relationship as if they together constituted a single transaction.
The transaction referred to in paragraph (a) of subsection (3) may not be taken to be a voidable preference unless the effect of applying subsection (1) in accordance with paragraph (c) of subsection (3) is that the single transaction referred to in paragraph (c) of subsection (3) is taken to be a voidable preference.
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A voidable preference is a transaction that may be set aside under subsection (1).