ExpertEasy1 markMultiple Choice
ACCA · Question 42 · Insolvency law
Section A
In a liquidation, which of the following debts is paid first from the company's realized assets?
Section A
In a liquidation, which of the following debts is paid first from the company's realized assets?
Answer options:
A.
Unsecured creditors.
B.
Preferential debts (e.g., employee wages).
C.
The expenses of the liquidation.
D.
Floating charge holders.
How to approach this question
Recall the statutory order of priority in a winding up.
Full Answer
C.The expenses of the liquidation.✓ Correct
The statutory order of payment in liquidation is: 1) Fixed charge holders (from the specific asset), 2) Expenses of the liquidation, 3) Preferential creditors, 4) Prescribed part (for unsecured creditors), 5) Floating charge holders, 6) Unsecured creditors, 7) Interest, 8) Shareholders.
Common mistakes
Assuming employees (preferential creditors) are paid before the costs of the liquidation itself.
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