Preferences and Transactions at Undervaluation in Company Liquidation

When a company enters liquidation, the liquidator may review transactions made before insolvency to ensure creditors have been treated fairly. Preference payments occur when one creditor is placed in a better position than others, while transactions at undervalue involve selling or transferring assets for less than their true market value. These transactions can be challenged and, in some cases, reversed to protect creditor interests. Directors should exercise caution when dealing with company assets or making significant payments during financial difficulty. Understanding these rules can help reduce risks and ensure compliance with insolvency legislation before liquidation becomes unavoidable.

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