Fraudulent preference - liquidator, Business Law and Ethics

Fraudulent preference - liquidator:

When a transaction is void as a fraudulent preference any charge created is void and any cash paid or property transferred by the company must be returned to the liquidator.  There can be complications when a third party, usually a creditor, has given security (eg. deposit with the lender of the title deeds of the director's house) as security for the company's debt.  The purpose of the fraudulent preference (as in the Kushler Case above) is often to release a third party from his involvement in the company's debt.  When the debt is paid (as a fraudulent preference) the lender returns to the guarantor whatever security the latter has given.  When the lender has to return to the liquidator the payment received he cannot require the guarantor to reinstate his security but the latter continues to be (or if there is no previous personal guarantee by him becomes) personally liable to the lender as a guarantor of the debt: CA, s.313.

Posted Date: 1/15/2013 5:43:04 AM | Location : United States

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