Liquidation of a Company: Priorities

Unfortunately it is a fact of life that businesses and companies fold. Sometimes there are telltale signs out there, whilst at other times a seemingly successful company can suddenly take a down turn for a variety of reason and quickly get put into liquidation with little or no warning.

When this happens, everyone wants to be able to get their money back who has a financial / monetary exposure with the company, but there is a strict order and this largely indicates who gets what, there is rarely a case where everyone gets back what they want!

The liquidator however is tasked with essentially turning the company into as much cash as it can, quickly and efficiently... the Insolvency Act then covers who gets paid and when.

Interestingly there is no partial payout - a line is paid out in full before the next is moved onto, so it could be those early in the pecking order get everything and the next rung down gets nothing at all.

Bottom of the list of liquidation are the ordinary shareholders (just below the preference shareholders) which illustrates the true risk that buying shares in a company can hold as there is no security with shares at all, literally. Above them are the creditors, then the holders, then preferential creditors, then the specific fixed charge holders, and of course top of the list the liquidator makes sure that they take their fees first!

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