Economics · Corporate Law
Which of the following statements represents an INCORRECT placement within the established hierarchy for the order of payment during a company's winding up?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Equity shareholders receive their return of capital and residual claims prior to the payment of preference shareholders.✓
- 2Preferential creditors, which include government dues and employees' wages, are paid before unsecured creditors.
- 3Secured creditors receive their payments from the proceeds of secured assets immediately after liquidation costs are settled.
- 4Liquidation costs, such as legal expenses and the liquidator's remuneration, hold the highest priority for payment.
Correct answer
Equity shareholders receive their return of capital and residual claims prior to the payment of preference shareholders.
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