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ACCA Applied Skills · Corporate and Business Law (Global) · Insolvency and administration

Orion Ltd is in liquidation. After paying the fixed charge holder from the charged property, the liquidator has general funds available. Which of the following is normally paid next, before preferential creditors?

The liquidation costs and expenses, including the liquidator's remuneration, are paid next from the general assets after fixed charge holders. Preferential creditors follow, then floating charge holders, then unsecured creditors. Paying the liquidator first ensures the winding up can actually be carried out.

  1. AThe costs and expenses of the liquidation, including the liquidator's remunerationCorrect
  2. BUnsecured trade creditors owed for goods supplied
  3. CFloating charge holders

Explanation

The costs of the winding up, including the liquidator's fees and expenses, are paid before preferential creditors from the general assets. Floating charge holders and unsecured creditors rank after preferential creditors, so they cannot be paid at this stage.

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