Companies Act 2014 section 605

Liabilities and rights of persons who have been unfairly preferred

Section 605 sets out the liabilities and rights that arise when a person has been unfairly preferred in connection with property used as security for a company's debt, and that preference is voided during a winding up.

• Where a company is being wound up and an act is voided as an unfair preference of a person with an interest in property securing the company's debt, that person becomes personally liable as if they were a guarantor for the debt, up to the lesser of the charge on the property or the value of their interest.
• The value of the preferred person's interest is determined as at the date of the unfair preference, and is calculated as though the interest were free of all encumbrances except those to which the charge for the company's debt was already subject.
• Where a court application is made on the grounds that a payment was an unfair preference of a surety or guarantor, the court may resolve any questions between the recipient of the payment and the surety or guarantor, grant relief, and allow the surety or guarantor to be joined as a third party.
• The court's powers in relation to unfair preference claims apply not only to payments of money but also, with necessary modifications, to other types of transactions.

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