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CS Professional · Corporate Restructuring, Valuation and Insolvency · Winding-up by Tribunal under the Companies Act, 2013

A company's winding up order was made by the Tribunal. Its workmen are owed wages for the two years preceding the order and accrued holiday remuneration. The company's assets are mortgaged to a bank. Which statement matches the proviso to section 326(1)?

Wages and accrued holiday remuneration for the two years before the winding up order are paid in priority to all other debts, even those due to secured creditors, within thirty days of sale of assets. They are paid in full before any payment to secured creditors.

  1. AThese sums are paid only after the secured creditors are fully paid
  2. BThese sums are paid in priority to all other debts, including secured creditors' debts, within thirty days of sale of assetsCorrect
  3. CThese sums are paid pari passu with secured creditors without any time limit
  4. DThese sums are paid only after the liquidator's costs and all unsecured debts are met

Explanation

The proviso covers wages and accrued holiday remuneration payable for two years before the winding up order (or other prescribed period). They are paid in priority to all other debts, including those due to secured creditors, within thirty days of sale of assets. Section 326(2) requires them to be paid in full before any payment to secured creditors, so the option placing secured creditors first is wrong.

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