ExpertMedium1 markMultiple Choice
ACCA · Question 41 · Insolvency law
Section A
Which of the following debts ranks highest in the statutory order of distribution during a liquidation?
Section A
Which of the following debts ranks highest in the statutory order of distribution during a liquidation?
Answer options:
A.
Preferential debts (e.g., employee wages).
B.
Unsecured creditors.
C.
The expenses of the liquidation.
D.
Floating charge holders.
How to approach this question
Recall the strict statutory hierarchy for paying out funds in a liquidation.
Full Answer
C.The expenses of the liquidation.✓ Correct
The statutory order of distribution is: 1) Fixed charge holders, 2) Expenses of the liquidation, 3) Preferential creditors (e.g., HMRC, employee wages), 4) Prescribed part fund, 5) Floating charge holders, 6) Unsecured creditors, 7) Shareholders.
Common mistakes
Assuming employees or HMRC get paid before the costs of the liquidation itself.
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