The Laws Regarding Unfair Preference Payments Can Sometimes Be a Challenge to Understand

An unfair preference payment is one made to a creditor when a company is in liquidation, and it is normally a payment that is a little higher than it would be in normal circumstances within a business relationship. Liquidators sometimes try to get money from suppliers by claiming that the payment is an “unfair preference” payment, and if you receive a letter saying that you need to pay back a payment because it is one related to “unfair preference,” the smartest thing you can do is consult with a legal expert. These letters are sometimes sent out illegally and can cause a lot of tension on your part, so the more research you do on them, the more confident you’ll feel about what to do next.

Defending Yourself Against a Preference Payment Accusation

According to the law, there are three main considerations when defending yourself against an accusation of an unfair preference payment, and they are described below:

  • You received valuable consideration from the creditor as part of the transaction.
  • There was good faith when the creditor was a party to the transaction.
  • When the transaction occurred, nothing was suspect because the company’s insolvency or potential insolvency wasn’t known.

In other words, no part of the transaction showed any type of suspicious behaviour because it looked from the very beginning to be on the up-and-up. The above examples are included in a defence known as a “good faith” defence, and it basically maintains that no one suspected that any member of the transaction was intentionally being dishonest about anything that occurred. This defence may or may not work, but it is a good place to start when you’re in this predicament.

In a running account defence unfair preference, numerous payments are usually involved, and the amounts within a certain timeframe – normally six months – are taken into consideration when trying to solve the dispute. There are other types of defences as well, and your legal representative can help you decide which one is right for you.

Rely on the Experts for Additional Information

In any of these scenarios, it is always recommended that you seek the advice of a true legal expert, because without that person’s assistance, you could be in real trouble, should this happen to you. Being accused of making unfair preference payments to a company can wreak havoc on your entire life, and since both creditors and supply companies can participate or suffer from this accusation, it is smart to familiarise yourself with the law when it comes to this topic. When all is said and done, it is better to avoid this situation in the first place, but even if you are conducting business in a completely honest fashion, that doesn’t mean that the other entities which you do business with are doing the same. If you receive a suspicious letter that says you owe someone money because of unfair preference payments, don’t panic. If you’ve conducted your business fairly and openly, there is likely nothing to worry about in the end, and the right legal expert will assist you with the rest.

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