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Who gets what? - The distribution hierarchy


The assets of the company, when realised, have to be distributed in the following order: -


1) Assets not available for "distribution"

(Assets which do not ‘belong’ to the company)

  • Assets in which title has been retained (eg. retention of title clause)
  • Assets subject to a fixed charge
  • Property held on trust by the company for the benefit of creditor


2) Cost , Charges & Expenses of the Winding-Up

(Costs incurred by the insolvency practitioner realising assets and carrying out statutory requirements)


3) Preferential Creditors

(These rank equally amongst themselves)

  • Employees (generally, for unpaid wages, accrued holiday pay and pension contributions)
  • National Insurance Fund: some amounts paid to the employee


4) Secondary Preferential Creditors

(For businesses which enter a formal insolvency procedure on or after 1 December 2020)

Certain specific HMRC debts where the business is required to deduct these taxes from payments they make to another other person and pay those deductions to HMRC and the payment to HMRC is credited against the liabilities of the other person.

The taxes involved include: -

  • Value Added Tax (VAT)
  • Pay As You Earn (PAYE) Income Tax
  • Employee National Insurance contributions (NICs)
  • Students loan repayments
  • Construction Industry Scheme deductions


5) Holders of debentures secured by a floating charge

Where the floating charges was created after 15 September 2003 a ‘prescribed part’ for payment to unsecured creditors may need to be calculated. See ‘“Prescribed Part” - What is it?’


6) Unsecured Creditors

  • all other creditors participate in the remaining assets in proportion to the size of their claims
  • since Enterprise Act 2002 this included any Crown debts (such as VAT and PAYE). However, as noted above, for insolvencies since 1 December 2020, certain elements of the Crown debt are "Preferential"





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