Preferential payments
Why a liquidator may ask a creditor to give money back.
What is a preference?
A preference is a payment (or other transaction) to an unsecured creditor that gives them more than they would receive in a liquidation, made while the company was insolvent. If the company goes into liquidation, the liquidator may seek to recover it.
For unrelated creditors, the look-back period is generally six months before the 'relation-back day' (indicative — longer periods apply to related parties).
Why it matters to directors
Payments made under pressure — to suppliers, the ATO, or creditors with personal guarantees from you — can later be scrutinised. Understanding preferences helps you make careful decisions while the company is under strain.
General information only — not legal or financial advice. Any figures or time limits are indicative and can change. Every situation is different; speak with us about yours.