Who gets paid first in company liquidation?
Creditors are paid according to legal priority, not who demands payment most strongly. Security, insolvency expenses, preferential claims and the assets available all affect the result. Unsecured suppliers may receive only part of their debt or nothing; shareholders rank behind creditors.
Business Insolvency Helpline • Checked 1 November 2026
General guidance, with procedural detail focused on England and Wales. Rules and routes can differ in Scotland and Northern Ireland.
How does the broad order work?
Fixed-charge assets are normally applied to the secured claim after relevant realisation costs. Insolvency expenses, ordinary preferential claims and secondary preferential claims then affect the available funds. A prescribed part of qualifying floating-charge assets may be reserved for unsecured creditors before the floating-charge holder is paid.
Remaining unsecured claims share the available distribution according to the rules. This is a simplified explanation: asset ownership, security validity, expenses and the particular procedure can change the calculation.
Does HMRC always get paid first?
No. Certain tax debts, including VAT and relevant PAYE, employee National Insurance and CIS deductions, rank as secondary preferential claims. Corporation Tax, employer National Insurance and many penalties or interest do not share that status.
Separate tax balances by type when preparing information. Putting all HMRC debt into one total can give a misleading picture of possible creditor recoveries.
What do fixed and floating charges mean?
A fixed charge usually relates to a specific asset; a floating charge generally concerns a changing pool of business assets. A debenture may contain both. The label on a document is not always conclusive, so have the security reviewed.
For a supplier, the useful questions are whether your goods still belong to you, whether you have valid security and what evidence supports the claim. Ask the office-holder rather than assuming your invoice has priority.
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Related questions
Not simply because they are directors. A genuine loan owed to a director needs its legal status assessed alongside other claims.
No. Only qualifying categories and amounts receive that treatment. Other employee balances may rank differently.
No. A recoverable preference concerns an earlier transaction; preferential creditor status is a statutory ranking in the distribution.
Sources checked for this guide
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