Distribution of assets Q - tips - type out answers Flashcards
How to lay out order of distribution answer
* = bold
The order of distribution
The order of distribution is as follows.
1. Moratorium debts etc.
2. Liquidation expenses
3. Preferential debts
4. The floating charge and the prescribed part
5. The unsecured creditors
6. Deferred debts
7. Members
3 columned table with amount in column 2 and balance in column 3
Wording for ‘1. Moratorium expenses etc.’
Under s.174a Insolvency Act 1986 (IA 1986) Moratorium debts rank ahead of all other debts, [but there are none in this scenario.]
Wording for ‘2. Liquidation expenses’
Under s.115 IA 1986 liquidation expenses are paid in priority to all other claims, other than moratorium debts etc. including those of floating charge holders (s.176ZA IA 1986). The liquidation expenses are £………….
Initial wording for ‘3. Preferential debts’
Once the liquidation expenses are paid the liquidator must pay off the preferential debts as identified in Schedule 6 IA 1986. These include the employees’ pay claims, but not the unpaid tax bill (s.175 IA 1986)
Initial wording for ‘The prescribed part’
Under s.176A IA 1986, the prescribed part must be set aside and made available to pay off the company’s unsecured debts. Article 3(1) of the Insolvency Act 1986 (Prescribed Part) Order 2003 provides that, where the net assets of the company exceed £10,000 the prescribed part is 50% of the first £10,000 and 20% of the balance.
Useful wording to use in ‘5. Unsecured creditors’
If there are insufficient assets to meet all the claims they are paid proportionately (s.107 IA 1986).
Wording to use in ‘6. Deferred debts’
Under s.179 IA 1986 states that deferred debts, such as the interest on debts are settled next, but there is no mention of interest payable in this scenario. If there were any deferred debts, they it would not be possible to meet them as there are not any assets remaining.
Wording to use in ‘7. Members’
As there are no assets left, no distribution can be made to XXXXXXXXX’s members.
