Ranking of Claims in Liquidation
In a winding up there shall be paid in priority to all other unsecured debts —
(a) firstly, the costs and expenses of the winding up, the remuneration of the liquidator and the costs of any audit carried out;
(b) secondly, all wages or salary (whether or not earned wholly or in part by way of commission) including any amount payable by way of allowance or reimbursement under any contract of employment or award or agreement regulating conditions of employment of any employee;
(c) thirdly, the amount due to an employee as a retrenchment benefit or ex gratia payment under any contract of employment or award or agreement that regulates conditions of employment whether such amount becomes payable before, on or after the commencement of the winding up;
(d) fourthly, all amounts due in respect of work injury compensation under the Work Injury Compensation Act (Cap. 354) accrued before, on or after the commencement of the winding up;
(e) fifthly, all amounts due in respect of contributions payable during the 12 months next before, on or after the commencement of the winding up by the company as the employer of any person relating to employees’ superannuation or provident funds or under any scheme of superannuation which is an approved scheme relating to income tax;
(f) sixthly, all remuneration payable to any employee in respect of vacation leave, or in the case of his death to any other person in his right, accrued in respect of any period before, on or after the commencement of the winding up; and
(g) seventhly, the amount of all tax assessed and all goods and services tax due before the commencement of the winding up or assessed at any time before the time fixed for the proving of debts has expired.
The debts in each class shall rank in the order specified but as between debts of the same class shall rank equally between themselves, and shall be paid in full, unless the property of the company is insufficient to meet them, in which case they shall abate in equal proportions between themselves.
Where any payment has been made to any employee of the company on account of wages, salary or vacation leave out of money advanced by a person for that purpose, the person by whom the money was advanced shall, in a winding up, have a right of priority in respect of the money so advanced and paid, up to the amount by which the sum in respect of which the employee would have been entitled to priority in the winding up has been diminished by reason of the payment, and shall have the same right of priority in respect of that amount as the employee would have had if the payment had not been made.
So far as the assets of the company available for payment of general creditors are insufficient to meet any preferential debts specified in (a), (b), (c), (e) and (f) and any amount payable in priority, those debts shall have priority over the claims of the holders of debentures under any floating charge created by the company (which charge, as created, was a floating charge), and shall be paid accordingly out of any property comprised in or subject to that charge.
Where the company is under a contract of insurance insured against liability to third parties, then if any such liability is incurred by the company (either before or after the commencement of the winding up) and an amount in respect of that liability is or has been received by the company or the liquidator from the insurer the amount shall, after deducting any expenses of or incidental to getting in such amount, be paid by the liquidator to the third party in respect of whom the liability was incurred to the extent necessary to discharge that liability or any part of that liability remaining undischarged in priority to all payments in respect of the debts.
Effect of floating charge
A floating charge on the undertaking or property of the company created within 6 months of the commencement of the winding up shall, unless it is proved that the company immediately after the creation of the charge was solvent, be invalid except to the amount of any cash paid to the company at the time of or subsequently to the creation of and in consideration for the charge together with interest on that amount at the rate of 5% per annum.
Liquidator’s right to recover in respect of certain sales to or by company
Where any property, business or undertaking has been acquired by a company for a cash consideration within a period of 2 years before the commencement of the winding up of the company —
(a) from a person who was at the time of the acquisition a director of the company; or
(b) from a company of which, at the time of the acquisition, a person was a director who was also a director of the first-mentioned company,
the liquidator may recover from the person or company from which the property, business or undertaking was acquired any amount by which the cash consideration for the acquisition exceeded the value of the property, business or undertaking at the time of its acquisition.
Where any property, business or undertaking has been sold by a company for a cash consideration within a period of 2 years before the commencement of the winding up of the company —
(a) to a person who was at the time of the sale a director of the company; or
(b) to a company of which at the time of the sale a person was a director who was also a director of the company first-mentioned,
the liquidator may recover from the person or company to which the property, business or undertaking was sold any amount by which the value of the property, business or undertaking at the time of the sale exceeded the cash consideration.
The value of the property, business or undertaking includes the value of any goodwill or profits which might have been made from the business or undertaking or similar considerations.
Disclaimer of onerous property
Where any part of the property of a company consists of —
(a) any estate or interest in land which is burdened with onerous covenants;
(b) shares in corporations;
(c) unprofitable contracts; or
(d) any other property that is unsaleable, or not readily saleable, by reason of its binding the possessor to the performance of any onerous act, or to the payment of any sum of money,
the liquidator of the company, notwithstanding that he has endeavoured to sell or has taken possession of the property or exercised any act of ownership, may, at any time within 12 months after the commencement of the winding up, disclaim the property; but where any such property has not come to the knowledge of the liquidator within one month after the commencement of the winding up, the power of disclaiming may be exercised at any time within 12 months after he has become aware.
Any person injured by the operation of a disclaimer shall be deemed to be a creditor of the company to the amount of the injury, and may accordingly prove the amount as a debt in the winding up.
Restriction of rights of creditor as to execution or attachment
Where a creditor has issued execution against the goods or land of a company or has attached any debt due to the company and the company is subsequently wound up, he shall not be entitled to retain the benefit of the execution or attachment against the liquidator unless he has completed the execution or attachment before the date of the commencement of the winding up, but —
(a) where any creditor has had notice of a meeting having been called at which a resolution for voluntary winding up is to be proposed, the date on which the creditor so had notice shall be substituted for the date of the commencement of the winding up; and
(b) a person who purchases in good faith under a sale by the bailiff any goods of a company on which an execution has been levied shall in all cases acquire a good title to them against the liquidator.