Home  /  Guides  /  Payment Order

When the money runs out,
the law sets the queue.

When an insolvent company's assets are shared out, nobody chooses. The order is fixed by statute. Knowing where you stand in it tells you, before the process even starts, what you can realistically expect.

1

Secured creditors with a fixed charge

Paid first, from the specific asset their charge covers. A lender with a fixed charge over a property takes that property's proceeds before anyone else sees a penny of it.

2

Costs of the insolvency

The liquidator's or administrator's fees and expenses come out next. Running the process costs money, and the process gets paid before the debts it was called to settle.

3

Preferential creditors

Mainly employee arrears of wages and holiday pay, within statutory limits. The people who worked for the company rank ahead of most lenders and all suppliers.

4

Floating charge holders

Lenders whose security floats over classes of assets like stock and debtors. A prescribed part of what they receive must be set aside for unsecured creditors.

5

Unsecured creditors

Trade suppliers, most contractors, HMRC for many debts. This is where most businesses sit, and where recoveries are often a fraction of what is owed.

6

Shareholders

Last, and only if anything remains, which in an insolvency it almost never does.

Why the order should shape your behaviour before, not after

The queue is the strongest argument for early action. By the time a liquidation begins, an unsecured supplier's claim is already ranked fifth out of six. The recoveries that matter are negotiated while the company still trades: shorter terms, payment up front, a guarantee. Once the process starts, those options are gone. The invoice recovery guide covers the sequence.

Charges matter here too. A company whose assets are all covered by charges has little left for unsecured creditors even before the queue starts. The charges register on a profile shows exactly what is already spoken for, and the charges and due diligence guide explains how to read it.

The practical test
Before extending significant credit, ask where you would sit if the company failed tomorrow. If the assets are charged and you rank fifth, price accordingly or decline.

Check any England & Wales company free. R-Score, CCJs, winding-up petitions, charges and five years of accounts on every profile.

Create Free Account → Search a Company