Voidable Preference
A transaction by an insolvent company that puts a creditor in a better position than they would have been in on a winding up, made within 6 months of insolvency (2 years for connected persons), and influenced by a desire to prefer. The liquidator may apply to court to reverse it (s.239 IA 1986).
Independent editorial summary — not the official statute text. Read the official version on legislation.gov.uk.
Section 239 of the Insolvency Act 1986 lets an office-holder unwind payments a company made shortly before insolvency that unfairly favoured one creditor over others. Where the company has, at a relevant time, given a preference to any person, the office-holder may apply to the court for an order under this section, and the court shall make such order as it thinks fit for restoring the position to what it would have been if the company had not given that preference.
The order is not automatic — the company must have chosen to prefer that creditor. The court shall not make an order under this section in respect of a preference given to any person unless the company which gave the preference was influenced in deciding to give it by a desire to produce the preferential effect. Where the preference was given to a person connected with the company, the Act presumes that desire was present unless the contrary is shown, reversing the burden of proof for insiders.
Related terms
Official sources
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