Preferential Payments

Preferential Payments

Preferential Payments can occur when a business suspects it is going to become insolvent at a future date and decides to pay certain creditors in preference of others. These are usually relatives, friends, or somebody that is holding a personal guarantee from the director/s.

If a liquidator can prove this has occurred within six months prior to the company declaring its insolvency, the liquidator has the power to ‘claw back’ or recall those funds from the creditors.

However, if the payments stretch beyond this six month period then the recovery of the money usually requires a court order. Those funds would then be added to the liquidator’s pool of money, which s/he would distribute among the creditors at the end of the liquidation process in the manner required by law.

The Corporations Act 2001 does allow three defences for companies issuing preferential payments:

  1. The creditor gave valuable consideration for the payment
  2. The creditor received the payment in good faith, and
  3. The creditor had no reason to suspect the insolvency of the company

Company Liquidation Sydney offers all of our services via the phone and in person, whichever is most convenient to you, because we understand that we need to be flexible and fit in with your busy schedule. If you suspect your company has been trading while insolvent, is guilty of Preferential Payments or is a creditor that has received preferential payments, Company Liquidation Sydney has a number of options available for you today.

There are severe penalties for breaching the laws surrounding liquidation, call us today and we can help you to take the right steps to ensure that you will be able to comply with the relevant laws.

So don’t wait any longer to get started on the liquidation of your business, liquidation must be taken seriously and our liquidation team can help you to approach your situation.

For a confidential discussion about your company’s financial situation, please contact Company Liquidation Sydney on 1300 60 70 60 today