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Liquidation: order of debt payment (Eng variant)

Forums › ACCA Forums › ACCA LW Corporate and Business Law Forums › Liquidation: order of debt payment (Eng variant)

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  • May 12, 2014 at 6:37 am #168439
    malcolmtucker
    Member
    • Topics: 4
    • Replies: 1
    • ☆

    Hi, I’ve been getting conflicting information regarding whether the liquidators are paid first or fixed chargeholders are paid first. I’m also confused as to whether preferential debts are paid after fixed chargeholders or not.

    The BPP text has the following order on pg 361:
    1) Costs (including liquidator’s remuneration)
    2) Preferential debts (including employee wages)
    3) Debts secured by floating charges (with allowance for unsecured creditors?)
    4) Unsecured creditors
    5) Deferred debts
    6) Members
    Fixed chargeholders are not on the above list (as far as I can understand) but there is a note below about creditors with fixed and floating charges being able to appoint receivers to sell the charged assets to recover their debts. Is it possible that, by doing this, they can get paid before the liquidator? Otherwise, where do they fall in the above list?

    The current BPP Revision Kit on page 235 has the same order except that instead of “debts secured by floating charges”they have “secured debts”, which I assume includes debts secured by fixed charges.

    According to https://uk.practicallaw.com/8-502-2031:
    “[liquidator’s fees] are generally paid out of the company’s assets, after secured creditors holding fixed charge security have been paid; but in priority to creditors who either have no security or have floating charge security over the company’s assets.”

    My lecturer gave the following order:
    1) Debts secured by fixed charges
    2) Liquidation expenses
    3) Preferential debts
    4) Debts secured by floating charges
    5) Unsecured debts
    6) Post liquidation expenses
    7) Declared but unpaid dividends
    8) Capital returned to members
    9) Surplus paid over to members

    What is the correct order?

    Thanks in advance.

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