The Corporations Act 2001 allows, in certain circumstances, a liquidator to claw back payments made to an unsecured creditor where the payment was made during the ‘relation back period’ - commonly a six month period before the appointment of the liquidator.
To establish that an unsecured creditor has received an unfair preference, the liquidator must show that:
For a person to have a defence to a claim of an unfair preference, they need to show that:
As such, electrical contractors are advised to call NECA Legal for advice as soon as an invoice becomes overdue. You should be wary of granting any extension of time to pay a debt owed to you, and should take action to obtain payment at the earliest opportunity to prevent, to the greatest extent possible, payments falling within the ‘relation back period’ and potentially being clawed back by a liquidator.
NECA Legal (WA) Pty Ltd can assist clients with debt recovery.
Disclaimer: The above summary is not legal advice and for more information on unfair preferences, call NECA Legal (WA) Pty Ltd on (08) 6241 6129 or email firstname.lastname@example.org.