14A:14-14. Preferences
473 words·~2 min read·
/nj/title-14a/chapter-14/14a-14-14·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
(1)For the purposes of this chapter, a preference arises when
(a)a corporation which, while insolvent, and within four months of the commencement of a receivership action by or against it, transfers any property to or for the benefit of a creditor for or on account of an antecedent debt; and
(b)the effect of such transfer will be to enable such creditor to obtain a greater percentage of his debt than some other creditor of the same class; and
(c)the creditor receiving or to be benefited by the transfer, or his agent acting with reference thereto, has, at the time when the transfer is made, reasonable cause to believe that the corporation is insolvent.
(2)For the purpose of determining whether a preference has arisen
(a)a transfer of property other than real property shall be deemed to have been made or suffered at a time when it became so far perfected that no subsequent lien obtainable by legal or equitable proceedings on a simple contract could become superior to the rights of the transferee;
(b)a transfer of real property shall be deemed to have been made or suffered when it became so far perfected that no subsequent bona fide purchase from the corporation could create rights in such property superior to the rights of the transferee.
(3)If any transfer of real property is not so perfected against a bona fide purchase, or if any transfer of other property is not so perfected against such liens by legal or equitable proceedings prior to the commencement of a receivership action, it shall be deemed to have been made immediately before the commencement of such action.
(4)When a preference has arisen, the receiver may recover the property or, if it has been converted, its value, from any person who has received or converted such property, except a bona fide purchaser from or lienor of the corporation's transferee for a present fair consideration. Where, however, such bona fide purchaser or lienor has given less than such value, he shall nevertheless have a lien upon such property, but only to the extent of the consideration actually given by him. When a preference is by way of lien or security title, the Superior Court may on due notice order such lien or title to be preserved for the benefit of the insolvent corporation's estate, in which event the lien or title shall pass to the receiver.
(5)If a creditor has been preferred and afterward in good faith gives the corporation further credit without security of any kind for property which becomes a part of the insolvent corporation's property, the amount of such new credit remaining unpaid at the time of the commencement of the receivership action may be set off against the amount which would otherwise be recoverable from such creditor.