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

Zeta Ltd is being wound up and its assets have been sold. Which of the following groups of persons is paid FIRST out of the proceeds of assets that were subject to a fixed charge?

The holder of the fixed charge is paid first from the proceeds of the charged asset, because the security gives priority over that asset. Unsecured creditors are paid later from general assets, and members receive nothing until every creditor has been paid in full.

  1. AThe holder of the fixed charge over those assetsCorrect
  2. BThe unsecured trade creditors of Zeta Ltd
  3. CThe members of Zeta Ltd, as holders of fully paid shares

Explanation

A fixed charge holder has security over a specific asset and is paid from the proceeds of that asset before the liquidator distributes to other creditors. Unsecured trade creditors and members rank much later, and members receive a return only if a surplus remains after all debts are paid.

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