Waterfall of payments in liquidation—the position under the Insolvency (England and Wales) Rules 2016
Produced in partnership with South Square
Waterfall of payments in liquidation—the position under the Insolvency (England and Wales) Rules 2016

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

  • Waterfall of payments in liquidation—the position under the Insolvency (England and Wales) Rules 2016
  • Fixed charge holders
  • Moratorium debts and Priority pre-moratorium debts
  • Expenses
  • Preferential debts (incorporating ordinary preferential debts and secondary preferential debts)
  • Prescribed part and floating charge holders
  • Unsecured creditors
  • Other liabilities, deferred debts and sums due to members in their capacity as members
  • Interest
  • Postponed debts
  • More...

The order of distribution in liquidation, following the realisation of security by secured creditors (other than those with floating charges) for their benefit, is provided for both in the Insolvency Act 1986 (IA 1986) and the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024.

Fixed charge holders

Realisations from property subject to a fixed charge as created will be paid to the fixed charge holder (less the liquidator’s costs of realisation). Any charge that was originally a floating charge but has become a fixed charge, eg by crystallisation or by notice of conversion before the relevant date defined in IA 1986, s 387, will be subordinated to preferential debts.

Moratorium debts and Priority pre-moratorium debts

The Corporate Insolvency and Governance Act 2020 (CIGA 2020) inserts a new Part A1 into IA 1986 which provides for a new insolvency process whereby directors of insolvent companies, or companies that are likely to become insolvent, can obtain a 20 business day moratorium period. This is designed to allow viable businesses time to restructure or seek new investment free from creditor action. 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 will have priority over all other claims.

Therefore, where a relevant winding up

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