Who gets paid first in the case of a company in liquidation ?
The order in which payments are made is fixed by statute. The general rule is that the creditors are paid in the following priority:- • 1) Secured creditors holding fixed charges such as a bank lending money backed by a mortgage on land and buildings (and sometimes fixed plant) typically bargained for taking less risk. Assets of the company usually back the credit that they extend. They know they should get paid very early on the list if the company is liquidated. They will only receive payment to the extent of the value of the asset that is subject to the charge. They will have to prove as unsecured creditors for the excess if there is a shortfall. • 2) Preferential creditors. These are creditors particularly government/crown departments who are statutorily preferred in the order of payment. • 3) Floating charge holders. These differ from (i) above (fixed charge holders) in that fixed charges relate to specific assets such as land/buildings/fixed plant and machinery. Fixed charges onl
