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208 Undue preferences

Undue preferences

Any transfer, mortgage, delivery of goods, payment, execution or other act relating to property made or done by a company may be voidable as a preference if (Section 293):

(a) the company was unable to pay its debts as they became due at the time of the transaction

(b) the act was done with preference for the creditor

(c) the act was done on the date of the resolution for voluntarily winding up or the date of the presentation of the petition (in case of a winding up by the court); or the commencing date of the winding up (in the case of a voluntary winding up).

Payments which are mutual dealings are however allowed. An example of mutual dealing is when a company makes repayment to a bank so that the bank withdraws its threat to petition for the winding up of the company.

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Undue preferences Copyright © 2011 by Wawasan Open University. All Rights Reserved.

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