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Legal blog > Company > Can a struggling company make preferential payments to certain creditors?

Can a struggling company make preferential payments to certain creditors?

Can we accept that a captain, after leading his ship into troubled waters, only saves the members of his crew that he has chosen and throws the others overboard? Mind the survivors!

«It's important to stay on course, even in troubled waters»

Seeing big waves on the horizon and before the whirlwind of legal proceedings leads them to bankruptcy, some debtors try to pay, preferentially, certain of their creditors.

A company facing difficulties agrees to settle, as a priority, amounts owed to a distributor who is also its main customer.

The bankruptcy trustee applies to the Superior Court to have this payment cancelled, considering it preferential since it was made within three months prior to a notice of intention to make a proposal in bankruptcy. The Court states that in order to overturn the trustee's claims, the distributor must prove: either that the payment resulted from a prior commitment and was made in the ordinary course of the company's business, or that they were unaware that the company was insolvent, or finally, that the payments made were necessary for the continuation of the company's activities.

The court, while recognizing that a creditor's insistence on obtaining payment from a debtor is not reprehensible, concludes that the payment in question allowed the company to continue its operations and is binding on the trustee.

Can we accept that a captain, after leading his ship into troubled waters, only saves the members of his crew whom he has chosen by throwing the others overboard? Watch out for the survivors!

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François Forget, notary and legal advisor as well as the entire Notaire-Direct team, are at your service to ensure the preparation of your legal documents and answer all your legal questions.
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