Reviewable transactions - preferences

Question 1

what are the conditions?

Answer 1

o The transaction was entered into in the ‘relevant time’:
 Unconnected = within 6 months preceding insolvency
 Connected = within 2 years preceding insolvency
o The recipient was a company’s creditor/surety/guarantor
o The company does/suffers anything to put the recipient in a better position than it would otherwise have been in on insolvency
o The company was influenced by a desire to enter into the transaction
o The company must have been unable to pay its debts before or as a result of the transaction (s123 IA test to be applied)

Question 2

what presumptions do and don’t apply?

Answer 2

Connected person/entity = desire presumed

insolvency is not presumed if the transaction was with a connected persion

Question 3

explain desire

Answer 3

a positive wish to improve creditor’s position. Not just a commercial decision

i.e. if a company pays a creditor to keep security to stay afloat, this wouldn’t be desire - this would be a commercial decision.

quire hard to prove.

Question 4

what are examples of preferences?

Answer 4

o Company pays off some/all of lender’s debt
o Granting security to a previously unsecured creditor
o Returning unpaid goods to a supplier