Voidable preference
What is a voidable preference in insolvency, and why should a lender care?
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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
A voidable preference is a payment or transfer made by a company shortly before it fails that puts one creditor ahead of the rest, and that a liquidator may be able to recover from the creditor who received it. The look-back period and the defences differ by country, and are generally wider for related parties. For a lender it cuts both ways: repayments received late in a decline can be challenged, and payments a borrower makes to a connected supplier in the same weeks are a warning sign worth acting on.
BASIS Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.
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