Preferential Creditor in Liquidation
A Preferential Creditor is one that is preferred by law. When a company is liquidated there is a statutory order of payment, which must be followed when paying creditors of the company. One type of creditor is the Preferential Creditor.
A Creditor Solicitor can help with claiming money owed to a Preferential Creditor and can also advise a company as to whom their Preferential Creditors are and what their rights are.
Prior to reforms in 2003 certain government agencies, including Inland Revenue, HM Customs and Excise and The Department of Social Security, were considered Preferential Creditors. However there are now only two main groups. The Preferential Creditors that remain following the reforms are employees with unpaid wages up to a statutory maximum and occupational pension schemes. These creditors will be paid after fixed charge holders and after the expenses of winding up are paid, but before holders of floating charges and before other unsecured creditors.
Usually, upon liquidation of a company, preferential creditors are paid in full. However, if there is insufficient money to cover the money owed to them, they will receive a portion of the money, for example 80p per £1 owed.
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