Both cases illustrate the court`s willingness to consider direct and indirect evidence and all other circumstances when determining the state of mind required in cases of unfair preference and fraudulent transfer. They are intended to strengthen the avoidance powers of an insolvency administrator and pave the way for enhanced creditor protection. If you need help responding to or defending an unfair preferential claim from an insolvency practitioner, please do not hesitate to contact Shavin Silva of Pace Lawyers or call him on 08 8410 9294. The essence of unfair preferential treatment is to put a creditor in a better financial position in the event of a liquidation of the business. An essential element of the current provisions is that the company is « influenced by the desire » to put the creditor in a better position. It is of crucial importance that when a connected person is preferred, influence is presumed and the move-in time is longer. Another important element is that the company was insolvent at the time of the preference or because of the preference. The insolvency practitioner will usually send you a collection letter explaining why they believe your business has received « unfair preferential treatment » from other creditors and asking you to repay the amounts you received, which may be referred to as « unfair preferential treatment ». There was a line of authority dating back to the 1960s, suggesting that a liquidator could choose at any time during the last 6 months and calculate the final effect of the preferential payment. As a general rule, liquidators would therefore assert claims that have the greatest preferential effect and make the demand for preferential payment as large as possible. The power of a liquidator to recover an unfair preferential payment is limited to payments and transactions made to creditors within 6 months prior to the liquidation of the company.
You can protect yourself from a possible unfair preferential claim by: Overall, the result is an elaborate maze of relationships and connections. Depending on the creditor`s relationship with the company or its directors, determining whether the transaction is included in the provisions can be a herculean task. However, the principle of the question is quite simple. An enterprise must not favour persons associated with its directors; Nor should it favour a corporation affiliated with it because it is controlled by the same person or persons. Unfair preferential claims are common when a company is liquidated and liquidators are appointed to manage its affairs. The general principle is that if a company in liquidation has unfairly favoured a person, the liquidator of the company may apply to the court for an order for the situation to be restored (Section 99(1) of the Insolvency Act). The following scenarios illustrate unfair preference: Unfair preference has some of the same characteristics as fraudulent transfer,[5] but legally they are distinct concepts. [6] As a general rule, proof of intent to commit fraud is not required to recover assets in an unjustified preference request. However, as with fraudulent transfer requests, unfair preferences are often observed in relation to asset protection schemes concluded too late by the debtor presumed to be bankrupt.
The issue of unfair preferential treatment of insolvent companies under Singaporean law is complex and abstruse. There are two reasons for this. The legal situation can only be determined by a careful reading and comparison of three different legal acts: the Companies Act (§ 329); the Insolvency Act (sections 99 to 102) and the Companies Regulations (Application of the Provisions of the Bankruptcy Act) (the « Regulations »). The definition of who could be considered « related » to the business is broad and complicated. First, the definitions of `member` in Article 101 described above are relevant for unfair preferential treatment of undertakings. For example, favouring a relative of a director would be tantamount to favouring a « person associated with a corporation ». Payments and transactions with creditors outside this 6-month window can still be pursued by a liquidator if they constitute a non-commercial transaction (2 years) or interfere with creditors` rights (10 years). Each of these remedies is generally more difficult to identify than an unfair preferential measure. Unfair preferences are the most common type of questionable transactions. They occur when a creditor has received a payment (or other advantageous transaction) for something owed to them, giving them an advantage over other creditors.
