Q&As

How will guarantees granted by a guarantor in favour of two different creditors rank in priority? Will either take priority over the other or will they rank equally?

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Published on LexisPSL on 17/05/2016

The following Banking & Finance Q&A provides comprehensive and up to date legal information covering:

  • How will guarantees granted by a guarantor in favour of two different creditors rank in priority? Will either take priority over the other or will they rank equally?

The principle at law is that all creditors will rank equally (or pari passu) unless the parties have agreed otherwise. Practice Note: Order of payments explains the pari passu principle in corporate insolvency and notes that:

'If they are ranked 'pari passu', each creditor is paid equally and without preference to one another'.

Further general information on the pari passu principle can be found in our PSL Restructuring & Insolvency Practice Note: The pari passu principle and collection remedies for the office-holder.

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