Legal Glossary
Unfair Preference
A payment or transfer made by an insolvent company to a creditor in the lead-up to liquidation that may be recovered by the liquidator under the Corporations Act 2001 (Cth).
An unfair preference is a transaction (typically a payment) made by an insolvent company to an unsecured creditor in the relation-back period before liquidation that results in the creditor receiving more than they would have through the insolvency process. A liquidator can apply to recover unfair preferences from the creditor, who is then ranked equally with other unsecured creditors. Defences exist — most notably the good-faith defence — but they are narrow and fact-specific.
Related practice area
Litigation & Dispute Resolution