Where an ailing company continued to trade, section 127 operated as between the company and its directors and creditors, and not so as to invalidate payments made by the company’s bank on cheques drawn before the date of presentation of the petition, and honoured before the date of the winding up order. Accordingly when an overdraft arose as a result of such payments, a person guaranteeing the company’s overdraft remained liable for the result.
The acts of a Bank in honouring cheques drawn on an insolvent company’s overdrawn account were a loan by the Bank to the company, but not a disposition of the company’s property. Section 127 ‘does not invalidate a company’s assumption of liabilities’.
Times 30-Nov-1999, Gazette 17-Dec-1999,  EWHC Ch 191,  1 WLR 906
England and Wales
Company, Insolvency, Banking
Updated: 19 May 2022; Ref: scu.79572