discuss the order of payment adopted by the liuidator
Answers
Answer:
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Explanation:
When a company enters insolvency and has to be liquidated, the order in which creditors are paid is defined by the Insolvency Act, 1986. This ‘hierarchy’ is divided into classes of creditor, and each class or group must be paid in full before the liquidator moves on to the next.
There are essentially three main categories – secured, unsecured, and preferential creditors – but these can be broken down further as we detail below.
Once the costs of liquidation have been covered, the first class of creditor to be paid are secured creditors with a fixed charge. At the bottom of this ranking lie unsecured creditors, who unfortunately, rarely fare well in these situations in terms of repayment.
Other factors also influence how much is received by each creditor class, including the cost of the liquidation process, the number of assets available for sale, and the ease with which they can be realised