Eighteen months before going into insolvent liquidation, and at a time when it was already unable to pay its debts, a company repaid an unsecured loan from a director's brother in full while its other creditors remained unpaid. Under s239 Insolvency Act 1986, what is the liquidator most likely to be able to do?

Correct answer: C) Apply to the court to set aside the payment as a preference

Explanation

A preference is something done by a company, while unable to pay its debts, that puts a creditor in a better position on insolvent liquidation than it would otherwise have been, where the company was influenced by a desire to do so. A director's brother is a relative and therefore an associate and a connected person (ss249 and 435), so the relevant period is two years before the onset of insolvency rather than six months, and the desire to prefer is presumed unless rebutted. The liquidator can therefore apply for an order restoring the position. Repaying a genuine debt is not a transaction at an undervalue, because the company receives a discharge of its liability, and disqualification applies to directors, not to the creditor who was paid.