Waterfall of payments—a comparative guide
Produced in partnership with South Square
Waterfall of payments—a comparative guide

The following Restructuring & Insolvency guidance note Produced in partnership with South Square provides comprehensive and up to date legal information covering:

  • Waterfall of payments—a comparative guide
  • Liquidation
  • Administration
  • Administrative Receivership
  • Company Voluntary Arrangement
  • Bankruptcy
  • Future developments

Liquidation

The order of distribution in liquidation, following the realisation of security by secured creditors (other than those with floating charges) for their benefit, is as follows:

  1. expenses (including the remuneration of the liquidator (see: section 115 of the Insolvency Act 1986 (IA 1986), Insolvency (England and Wales) Rules (IR 2016), SI 2016/1024, rr 6.42, 7.108)

  2. ordinary preferential debts (see: IA 1986, ss 175, 386 and Sch 6)

  3. secondary preferential debts (see: IA 1986, ss 175, 386 and Sch 6)

  4. any charge that was originally a floating charge but has become a fixed charge

  5. floating charges (save for the prescribed part for unsecured creditors where not disapplied) (see: IA 1986, s 175(2), Commissioners of Customs & Excise v Royal Bank of Scotland, IA 1986, s 176A, Re Airbase (UK) and Re Permacell Finesse (in liquidation) [2007] (not reported by LexisNexis®)))

  6. unsecured creditors

  7. statutory Interest (IA 1986, s 189(2))

  8. postponed debts (ie non-provable liabilities)

  9. return of any surplus to members (subject to adjustment between members—see: IA 1986, s 72(2)(f)

For further information, see Practice Note: Waterfall of payments in liquidation—the position under the Insolvency (England and Wales) Rules 2016.

Administration

The order of distribution of a company’s assets in administration (when the administrator has permission from the Court to distribute) is as follows: