ACCA LW · Chapter 11 · Question 5 of 10
Arrange the following claims in the order in which they would be paid from assets subject to a floating charge in a company's liquidation, from FIRST to LAST: (1) unsecured trade creditors; (2) liquidation expenses; (3) the floating charge holder; (4) preferential creditors such as employees' unpaid wages within statutory limits.
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) 2, 4, 3, 1
Explanation
From floating charge assets the liquidator first pays the expenses of the liquidation, then preferential creditors, then (after setting aside the prescribed part for unsecured creditors) the floating charge holder, and finally the unsecured creditors. Preferential debts include certain employee wages and holiday pay up to statutory limits. Members receive any surplus only after all creditors have been paid in full.
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