Unfair preferences demystified

If you operate a business, it is important to be aware of what can happen if you receive a payment from a customer who subsequently goes into bankruptcy or liquidation, and that payment is found to be an unfair preference payment. Payments that are unfair preferences can be 'clawed back' by a liquidator or bankruptcy trustee.

Although the term 'unfair preference' is commonly referred to when a company goes into liquidation, the concept of an 'unfair preference payment' is not commonly understood. So, what is does 'unfair preference' mean and what you should you be aware of?

The law concerning unfair preferences varies a little depending on whether the person who made the payment was a company or an individual.