Week 12 - Order of Payment 2

Question 1

What is the overall order

Answer 1

Secured creditors with a fixed charge
Costs of the liquidation
Preferential creditors
Secondary preferential creditors
Secured creditors with a floating charge
Unsecured creditors
Shareholders

Question 2

Who gets paid fifth?

Answer 2

Secured creditors with a floating charge

Question 3

Who gets paid sixth?

Answer 3

Unsecured creditors

Question 4

Who gets paid seventh?

Answer 4

Shareholders

Question 5

Secured creditors with a floating charge?

Answer 5

Creditors have a claim over assets that can change over time, such as stock, raw materials, or cash in the back. The floating charge ‘crystallises’ upon insolvency, allowing these creditors to recover their debts from the sale of these assets

Question 6

Unsecured creditors

Answer 6

This group includes all other creditors who do not have secured or preferential status. They are paid from any remaining funds

Question 7

Shareholders

Answer 7

Any remaining funds are liquidated - this is rare in insolvent liquidations