Priory Asset Management Ltd is a company in liquidation and Pranav has been appointed as liquidator. The company’s assets consist of the company’s business premises valued at £200,000, and other assets valued at £50,000. Pranav has discovered the following liabilities owed by the company:

a)A floating charge over the company’s assets created three months before the company went into liquidation. The charge was granted in favour of Sam, who is a director and shareholder in the company and it was granted to secure a loan of £50,000 made by Sam to the company a year ago. The full amount of £50,000 is still owed by the company.

b)A fixed charge over the business premises in favour of North Western Bank PLC to secure a loan of £220,000 made by the bank simultaneously with the creation of the charge. The charge was created one month before the company went into liquidation, and the full amount of the loan is still owed by the company.

c)£50,000 in arrears of salary owed to the company’s employees.

d)£20,000 owed to HMRC in respect of unpaid corporation tax

e)Trade debts owed to three creditors in the respective sums of £25,000, £15,000 and £10,000.

f)Liquidators fees and costs of £10,000.

Advise Pranav of the validity of the liabilities owed by the company and the security granted for them, and of the order in which the assets of the company should be distributed (you should assume that the charges have been properly registered).

Sample Solution