In what order will funds get disbursed in a company liquidation?

The Corporations Act (Section 556) sets out a strict order in which funds are to be disbursed in a company liquidation. The act stipulates that the following must be paid in priority before any monies can be distributed to ordinary unsecured creditors:

  1. First – any expenses incurred by the liquidator in obtaining and realising the company’s assets (this includes any costs incurred in trading on the business);
  2. Second – if the company was wound up by the Court then the petitioning creditor’s costs (i.e. the legal fees incurred in winding up the company);
  3. Third – if the company was placed into Voluntary Administration prior to liquidation then any expenses incurred by a Voluntary Administrator;
  4. Fourth – if the company was wound up by the Court then any costs incurred to prepare a Report as to Affairs for the company;
  5. Fifth – if the company was wound by a resolution of the creditors following a Voluntary Administration then any costs incurred in preparing a report for the liquidator;
  6. Sixth – if ASIC orders an audit of the liquidator’s six monthly receipts and payments then the costs of that audit;
  7. Seventh – if the liquidator incurs any expenses in winding up the company then those expenses;
  8. Eighth – the liquidator’s fees;
  9. Ninth – if a committee of inspection has been appointed then the costs incurred by the committee;
  10. Tenth – employee’s wages andsuperannuation;
  11. Eveleth – any personal injury compensation;
  12. Twelfth –employee leave of absence;
  13. Thirteenth – any redundancy payments to employees;

If there is insufficient money (after the above priority payments have been made) to pay unsecured claims in full, then ordinary unsecured creditor claims will be paid on a pro-rated basis.
If you would like to discuss how the liquidator disburses funds in a liquidation, call the company liquidation experts on 1800 731 155.

The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

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