Order of application of assets, Business Law and Ethics

Order of application of assets:

The order of application of assets is therefore as follows:

(a) secured creditors who have fixed charges are entitled to be paid out of their security so far as it suffices.  If the security is insufficient in value to pay the debt in full the creditor rank as an unsecured creditor for the balance;

(b) the costs of winding up are paid next, i.e. they rank before floating charges;

(c) preferential unsecured debts are paid next, i.e. they rank before floating charges in so far as there are no other assets available to pay preferential debts.  If the floating charge covers the entire undertaking and property of the company (as is normal in modern practice) there will be no uncharged assets;

(d) debts secured by floating charges come next in order;

(e) unsecured non-preferential debts come next;

(f) deferred debts come last in order.

Posted Date: 1/15/2013 5:25:47 AM | Location : United States

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