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Can you please explain to me what is the difference between Secured creditor [both fixed & floating chargeholder] and Unsecured creditor.
If the company goes bankrupt then secured creditors can take the assets on which they are secured. Unsecured creditors just have to accept a share of whatever all the assets get sold for.
Secured creditors are secured by the assets but what are the fixed & floating charge holders ?
Can you also state the hierarchy for the creditors when the company is liquidated?
A fixed charge is secured on specific assets (e.g. a bank lending money secured on a building), a floating charge is secured on all assets (which are shared between all secured creditors if they do not realise enough money to be able to pay them all in full).
The hierarchy if a company goes bankrupt is really something you should remember from Paper LW (was F4) and is not really terribly likely to be relevant for Paper FM.
However, the order is:
Secured creditors with a fixed charge
Employees who are owed wages
Secured creditors with a floating charge
Unsecured creditors
Preference shareholders
Ordinary shareholders
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