Individual has been working on a self employed basis for a company. He had no other connection to the company. He was paid for work done just prior to the company going bust. However, the liquidator is now chasing him for this money to be repaid on the basis that he received his money but other creditors received nothing.
Do the liquidators have any basis for doing this given that there was no connection to the company and he could not influence that payment made to him over other creditors?
Thanks for any thoughts
Replies (4)
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Yes there is such a thing as an unfair preference, that can be set aside on the application of a liquidator.
Whether this is one, and whether the liquidator would win if the issue were contested in court, are straight down the middle legal matters, not matters for accountants.
Possibly. S239 of the Insolvency Act is the relevant legislation: http://www.legislation.gov.uk/ukpga/1986/45/section/239
There are basically 2 tests:
Was the creditor put in a better position than others? - it looks like yes
Was there a desire to put them in a better position than others? - uncertain
I'd recommend they take legal advice.
To be very pragmatic, is it a large sum?
If it is not the chances of the liquidator advancing into some form of legal process re recovery is probably pretty remote? His/her time and legal costs would surely outweigh possible recovery.,
I would merely, at this stage, refute his claim and leave it at that.
If it gets more legal your client can see if it is worthwhile paying for legal advice, he can, after all, change course later and repay if at that time it looks like the liquidator will actually try to do anything beyond demanding repayment.
The desire to put the other creditor in a better position is key. https://www.companyrescue.co.uk/guides-knowledge/guides/preference-insol...