Receiving a preference payment notice can be a significant matter for any business or individual. In the context of business and insolvency law, a preference payment is a payment or series of payments received from a company that is insolvent, or becomes insolvent, which gives the recipient an advantage over other creditors. Here’s an overview of what it means and what you should do if you receive a preference payment notice:

Understanding Preference Payments

• Definition: A preference payment is typically made by a company to a creditor shortly before it goes into liquidation or bankruptcy.
• Reason for Concern: Such payments are scrutinised because they can unfairly prefer one creditor over others. The insolvency laws aim to ensure equitable distribution of a company’s assets among all its creditors.

What a Preference Payment Notice Implies

1. Investigation: The liquidator or administrator of the insolvent company believes that you received a payment (or payments) that gave you an unfair advantage over other creditors.
2. Potential Reversal: The notice usually indicates that the liquidator intends to recover these funds as part of the insolvency process.

Steps to Take After Receiving the Notice

1. Review the Notice: Understand the details of the notice, including the amount and the transactions in question.
2. Seek Legal Advice: Consult with a legal professional experienced in insolvency law. They can provide advice on your rights and options.
3. Gather Documentation: Compile any relevant documentation related to the transactions, such as invoices, payment records, and correspondence.
4. Assess Your Position: With your legal advisor, evaluate whether the payment received was genuinely a preference payment and if any defenses apply.
5. Communicate with the Liquidator: Respond to the notice within the given timeframe, and be prepared to negotiate or dispute the claim based on your legal advice.

Possible Defenses Against a Preference Payment Claim

• Good Faith: Argue that you received the payment in good faith, without knowing that the company was insolvent.
• Value for Money: Demonstrate that you provided value (goods or services) in return for the payment, at market rate or under standard terms.
• Running Business: Show that the payment was part of ordinary business transactions.
• No Suspicion of Insolvency: Prove that you had no reason to suspect the company was insolvent at the time of the transaction.

Legal Implications

• Repayment: If the claim is upheld, you may be required to repay the amount to the liquidator.
• Negotiation: In some cases, it might be possible to negotiate a settlement with the liquidator.