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It says the answer is false when:
“Liquidators expense are repaid after secured creditors but before members”
But the kaplan book says liquidators must repay debts in the following order:
1. Fixed charge holders
2. Expenses of liquidation
3. Preferential creditors (unpaid wages of employees)
4. Floating charge holders
5. Unsecured creditors
6. Members …..So why is it wrong? It is after fixed creditors and before members no?
Because floating charge debenture holders are also secured creditors and the liquidator is paid before them
As a practical point, I was talking with a liquidator and asked specifically about this point
The conversation went like this:
“Is it right that the fixed charge debenture holders are paid first?”
“Yes, the fixed charge debenture holders are paid first”
“So does that mean that, where the only asset is that which is secured against a fixed charge debenture and is not enough to repay that debenture in full, the liquidator will receive absolutely nothing for all their time and expenses?”
“Ah, no. The liquidator will rank alongside the fixed charge debenture holder”Effectively, I believe, the liquidator will come to an agreement with that fixed charge debenture holder that the liquidator should be reimbursed from the proceeds of sale when that asset is sold
OK?
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