Preference

A type of transaction carried out by a company’s directors, or a Debtor prior to bankruptcy, intended to favour one creditor over another (also known as putting them in a better position). For example – John owes Mary and Fred £15,000 each, John receives £20,000 and chooses to give £15,000 to Mary but only £5,000 to Fred – this transaction was intended to favour Mary and could therefore be a Preference. Preference transactions can be challenged by a Liquidator, Trustee in bankruptcy or Administrator if they took place within the period of 6 months ending with the onset of Insolvency or the presentation of the bankruptcy petition or in the case of a connected party within 2 years ending with the onset of Insolvency or the presentation of the bankruptcy petition. and if successful can result in payments being recovered from either the beneficiary of the Preference or the directors of the company.