Bankruptcy and Insolvency Act

Marginal note:Protected transactions

• 97 (1) No payment, contract, dealing or transaction to, by or with a bankrupt made between the date of the initial bankruptcy event and the date of the bankruptcy is valid, except the following, which are valid if made in good faith, subject to the foregoing provisions of this Act with respect to the effect of bankruptcy on an execution, attachment or other process against property, and subject to the provisions of this Act respecting settlements, preferences and reviewable transactions:

  • (a) a payment by the bankrupt to any of the bankrupt’s creditors;

  • (b) a payment or delivery to the bankrupt;

  • (c) a transfer by the bankrupt for adequate valuable consideration; and

  • (d) a contract, dealing or transaction, including any giving of security, by or with the bankrupt for adequate valuable consideration.

• Definition of adequate valuable consideration

  (2) The expression adequate valuable consideration in paragraph (1)(c) means a consideration of fair and reasonable money value with relation to that of the property assigned or transferred, and in paragraph (1)(d) means a consideration of fair and reasonable money value with relation to the known or reasonably to be anticipated benefits of the contract, dealing or transaction.

• Marginal note:Law of set-off or compensation

  (3) The law of set-off or compensation applies to all claims made against the estate of the bankrupt and also to all actions instituted by the trustee for the recovery of debts due to the bankrupt in the same manner and to the same extent as if the bankrupt were plaintiff or defendant, as the case may be, except in so far as any claim for set-off or compensation is affected by the provisions of this Act respecting frauds or fraudulent preferences.