The Distribution Hierarchy
- Who Gets What?
The assets of the company, when realised, have to be are distributed in the following order: -
1) Assets not available for "distribution"
(Assets which do not ‘belong’ to the company)
- Assets in which title has been retained (eg. retention of title clause)
- Assets subject to a fixed charge
- Property held on trust by the company for the benefit of creditor
2) Cost , Charges & Expenses of the Winding-Up
3) Preferential Debtors
(These rank equally amongst themselves)
- Employees (generally, for unpaid wages, accrued holiday pay)
- National Insurance Fund: some amounts paid to the employee
4) Holders of debentures secured by a floating charge
Where the floating charges was created after 15 September 2003 a ‘prescribed part’ for payment to unsecured creditors may need to be calculated. See ‘“Prescribed Part” - What is it?’
5) Unsecured Creditors
- all other creditors participate in the remaining assets in proportion to the size of their claims
- since Enterprise Act 2002 this includes any Crown debts (such as VAT and PAYE)
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