Who Gets Paid First in a Company Liquidation?

When a company enters liquidation, its assets are sold and the proceeds are distributed to creditors. However, not all creditors are treated equally. UK insolvency law sets out a strict order of priority that determines who gets paid first. Understanding this hierarchy is important for directors and creditors alike. Once a company goes into liquidation, a licensed insolvency practitioner is appointed as the liquidator. Their role is to take control of the company’s assets, realise their value, and distribute funds to creditors in accordance with the legal order of priority. This process ensures fairness and transparency. At the top of the payment hierarchy are secured creditors with fixed charges. These are lenders who have security over specific assets, such as property, machinery, or vehicles. Because their lending is backed by particular assets, they have the first right to be repaid from the sale of those assets. For example, if a bank holds a fixed charge over a company’s premises, it will be paid from the proceeds of that sale before others.

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