Question

With reference to relevant provisions of the Corporations Act 2001 (Cth), explain the differences between unfair preferences and uncommercial transactions.

Answer 1

The main differences between the unfair preferences and uncommercial transactions are discussed as below:

(a) The unfair preferences would be applicable under s588FA while uncommercial transactions are applicable under s588FB

(b) An uncommercial transaction would effectively indulge in an undertaking a detriment/ benefit transaction analysis on the company; whereas the unfair preference would turns on the transaction effect or result in relation to an unsecured debt with an effective comparison on what the creditor received from the firm with what the creditor would have received on the company's winding up

c) The uncommercial transactions within a period of two year of the relation back day would be recoverable while the unfair preferences within period of six months of the relation back day would be recoverable

d) The uncommercial transactions within a period of four year for the unrelated parties would be recoverable while the unfair preferences within period of four year the unrelated parties would be recoverable