When a company is insolvent, its assets are to be distributed (e.g., in liquidation). The key principle is that certain creditors are given priority over others.
The order of distribution is as follows:
- Liquidator fees and expenses
- Secured creditors with a fixed charge
- Preferential creditors
- Secured creditors with a floating charge
- Unsecured creditors
- Connected unsecured creditors
- Shareholders
