Unfair Preference of Creditors

You cannot make payments, or transfer assets to one creditor in preference to another creditor. This would be considered an unfair preference. Ultimately could lead to fines or further actions bought against you.
HMRC COP9 Investigations

Examples of This:

If you choose to pay HMRC creditors as they had threatened you with legal action. If you repaid your own director’s loan account. All creditors must be treated equally when the company is insolvent. If the directors unfairly give preference to some creditors, the Court can set aside such transactions. They can order the directors to return the asset or repay the funds.

It is common for an official receiver to look for and spot for overdrawn directors loan accounts.  It is likely that even if the company has written off the loan, an official receiver would look to reverse this. Including ask the director to repay the loan to satisfy their creditors. This is certainly not something that can be swept under the carpet prior to liquidation. Historic accounts will be investigated.  In these circumstances, the director will be expected to repay the loan account out of their own pocket.

Our team can assist you if you have concerns about liability as a director may impact your business or future business opportunities. If you would like to have a confidential discussion with a member of our team, please complete our Contact Us Form. We will call you back at a time that is suitable for you, or you can contact us directly on 01908 414990.

Back to Main Directors Liabilities