Notes for Guidance - Bankruptcy (Scotland) Act 2016 (as amended)

Similarly, in terms of Section 99 of the Act, the trustee can raise a statutory action for reduction of an unfair preference provided the relevant transaction took place:

• not more than six months before the date of bankruptcy
• 12 months before the date of death in the case of a deceased debtor

An unfair preference is created if the debtor has made a payment to a creditor which was collusive and intended to prejudice the interests of the general body of creditors.

The only defences to a statutory challenge of an unfair preference are:

• the transaction was in the ordinary course of trade or business
• the payment in cash was for a debt which, when it was paid, had become payable
• the transaction was one where parties had undertaken reciprocal obligations (whether performance of respective obligations occurred at the same or different times)
• the granting of a mandate by the debtor authorised the arrestee to pay over arrested funds or part thereof to the arrestor