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

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

  • Waterfall of payments—a comparative guide
  • Liquidation
  • Administration
  • Moratorium
  • Administrative Receivership
  • Company Voluntary Arrangement
  • Restructuring Plan
  • Bankruptcy

Waterfall of payments—a comparative guide

Liquidation

The order of distribution in liquidation, following the realisation of security by fixed charge secured creditors for their benefit, is as follows:

  1. where liquidation occurs within 12 weeks of a moratorium, any moratorium debts and ‘priority pre-moratorium debts’ for which the company did not have a payment holiday during the moratorium but which were not paid

  2. 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)

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

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

  5. the prescribed part for unsecured creditors (where not disapplied) (see IA 1986, s 176A)

  6. debts secured by floating charges

  7. unsecured debts

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

  9. postponed debts (ie non-provable liabilities)

  10. 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:

  1. debts secured by fixed charges

  2. where administration occurs within 12 weeks of a moratorium, any moratorium debts and ‘priority pre-moratorium debts’ for which

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