Rescue, Rehabilitation and Insolvency (Corporate and Personal) Act 2026 · As enacted · Part XV
428. Set-off between a company and another party
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
Subject to subsections (3), (4) and (5), where there have been mutual credits, mutual debts or other mutual dealings between a company and a person who seeks or, but for the operation of this section, would seek to have a claim admitted in a liquidation, by way of proof of debt –
an account shall be taken of what is due from one party to the other in respect of those credits, debts or dealings;
an amount due from one party shall be set off against an amount due from the other party; and
only the balance of the account shall be admitted as a provable debt or be payable to the company.
For the purposes of subsection (1), mutual credits, mutual debts and other mutual dealings do not include –
any debt arising out of an obligation incurred at any time after commencement of the liquidation or after which the person had notice of –
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the convening of a meeting of the company to consider a resolution for the appointment of a liquidator under paragraph (a) of subsection (2) of section 298;
the convening of a meeting of the board of the company to consider a resolution for the appointment of a liquidator under paragraph (b) of subsection (2) of section 298;
the making of an application under paragraph (c) of subsection (2) of section 298;
a resolution of creditors for the appointment of a liquidator under paragraph (b) of subsection (2) of section 214;
any debt acquired by the person, by assignment or otherwise, under an agreement entered into at any time after commencement of the liquidation or after which the person had notice of –
the convening of a meeting of the company to consider a resolution for the appointment of a liquidator under paragraph (a) of subsection (2) of section 298;
the convening of a meeting of the board of the company to consider a resolution for the appointment of a liquidator under paragraph (b) of subsection (2) of section 298;
the making of an application under paragraph (c) of subsection (2) of section 298; or
a resolution of creditors for the appointment of a liquidator under paragraph (b) of subsection (2) of section 214.
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Subsection (1) shall not apply to an amount paid or payable by a contributory –
as the consideration or part of the consideration for the issue of a share; or
in satisfaction of a call in respect of a liability of the contributory made by the board of the company or by the liquidator.
For the purposes of this section, rules may be prescribed under subsection (6) of section 426 on determining the said amounts.
Where an amount due from the company to the person referred to in subsection (1) includes both preferential claims and claims that are not preferential claims, the amount due from the person to the company shall under paragraph (b) of subsection (1) be set off rateably against such claims.
C – DISTRIBUTIONS