Distribution of assets in insolvency


In business insolvency, during liquidation of a company, the liquidator will ask creditors to send them proof of debt. The liquidator will then approve, or reject, the proof of debt and, if approved, will rank it in the statutory order of payment.

The distribution of the assets in accordance with the statutory order of payment occurs when all the assets have been collected and realised. 

The statutory order of payment - who gets paid first?

The statutory order of payment means that creditors with fixed charges will be paid first, from the sale of the property against which they have the fixed charge.

Following this, expenses of winding-up are paid; this includes the liquidator’s fee and their professional advisors’ fees.

Next to be paid are the preferential creditors (employees and occupational pension schemes) followed by the unsecured creditors, interest payments on preferential and unsecured debts, deferred creditors, and lastly, any surplus is distributed amongst shareholders.

How are the creditors paid?

The liquidator pays creditors by making funds available and then declaring a dividend and distributing the dividend to those creditors who have proved their debts.

There are complex provisions in the distribution of assets in business insolvency, including parts of the assets being ‘ring fenced’ for unsecured creditors instead of going to floating charge holders. 

If you would like to obtain legal advice on the distribution of assets in business insolvency or about the statutory order of payment, Contact Law can put you in touch with a local specialist creditor solicitor free of charge. So, if you have any questions or would like our help in finding local creditor solicitors please call us on 0800 1777 162 or complete the web-form above. 

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