Law · Corporate Insolvency Law
During the compulsory liquidation of Omega Ltd, the liquidator has realized assets totaling $100,000. The company's liabilities include: - $20,000 for the liquidator's own remuneration and expenses. - $30,000 due to a bank under a floating charge created and registered in 2022. - $40,000 due to a supplier under a fixed charge created in 2023 but registered 30 days after creation (beyond the statutory time limit). - $15,000 in holiday pay arrears for employees. In what order will the liquidator distribute the funds, and which debt loses its expected priority?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1The bank (floating charge) and the supplier (fixed charge) will share the remaining funds pari passu after the liquidator and employees are paid.
- 2The floating charge will be paid before the fixed charge because the fixed charge was not registered within the statutory timeframe.✓
- 3The liquidator's expenses are paid first, followed by the employee holiday pay as preferential creditors, then the floating charge.
- 4The fixed charge to the supplier will be paid first because fixed charges always outrank all other claims.
Correct answer
The floating charge will be paid before the fixed charge because the fixed charge was not registered within the statutory timeframe.
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