Companies Act, 1963

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Preferential payments in a winding up.

285.—(1) In this section “the relevant date” means—

(i) where the company is ordered to be wound up compulsorily, the date of the appointment (or first appointment) of a provisional liquidator or, if no such appointment was made, the date of the winding-up order, unless in either case the company had commenced to be wound up voluntarily before that date; and

(ii) where subparagraph (i) does not apply, the date of the passing of the resolution for the winding up of the company.

(2) In a winding up there shall be paid in priority to all other debts—

(a) the following rates and taxes,—

(i) all local rates due from the company at the relevant date and having become due and payable within 12 months next before that date;

(ii) all assessed taxes, including income tax and corporation profits tax, assessed on the company up to the 5th day of April next before the relevant date and not exceeding in the whole one year's assessment;

(iii) any amount due at the relevant date in respect of sums which an employer is liable under the Finance (No. 2) Act, 1959 , and any regulations thereunder to deduct from emoluments to which Part II of that Act applies paid by him during the period of 12 months next before the relevant date reduced by any amount which he was under that Act and any regulation thereunder liable to repay during the said period, with the addition of interest payable under section 8 of that Act;

(b) all wages or salary (whether or not earned wholly or in part by way of commission) of any clerk or servant in respect of services rendered to the company during the 4 months next before the relevant date;

(c) all wages (whether payable for time or for piece work) of any workman or labourer in respect of services rendered to the company during the 4 months next before the relevant date;

(d) all accrued holiday remuneration becoming payable to any clerk, servant, workman or labourer (or in the case of his death to any other person in his right) on the termination of his employment before or by the effect of the winding-up order or resolution;

(e) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, all amounts due in respect of contributions payable during the 12 months next before the relevant date by the company as the employer of any persons under the Insurance (Intermittent Unemployment) Act, 1942 , or the Social Welfare Acts, 1952 to 1961;

(f) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, all amounts (including costs) due in respect of compensation or liability for compensation under the Workmen's Compensation Acts, 1934 to 1955 (being amounts which have accrued before the relevant date), to the extent that the company is not effectively indemnified by insurers against liability for such compensation;

(g) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company, all amounts due from the company in respect of damages and costs or liability for damages and costs, payable to a person employed by it in connection with an accident occurring before the relevant date and in the course of his employment with the company, to the extent that the company is not effectively indemnified by insurers against such damages and costs.

(3) Subject to subsection (4), and notwithstanding anything in paragraphs (b) and (c) of subsection (2) the sum to which priority is to be given under those paragraphs respectively shall not, in the case of any one claimant, exceed £300.

(4) Where a claimant under paragraph (c) of subsection (2) is a farm labourer who has entered into a contract for payment of a portion of his wages in a lump sum at the end of the year of hiring, he shall have priority in respect of the whole of such sum, or such part thereof as the court may decide to be due under the contract, proportionate to the time of service up to the relevant date.

(5) Where any compensation under the Workmen's Compensation Acts, 1934 to 1955 is a weekly payment, the amount due in respect thereof shall, for the purposes of paragraph (f) of subsection (2) be taken to be the amount of the lump sum for which the weekly payment could be redeemed if the employer made an application for that purpose under the said Acts.

(6) Where any payment has been made—

(a) to any clerk, servant, workman or labourer in the employment of a company, on account of wages or salary; or

(b) to any such clerk, servant, workman or labourer or, in the case of his death, to any other person in his right, on account of accrued holiday remuneration;

out of money advanced by some 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 clerk, servant, workman or labourer or other person in his right, would have been entitled to priority in the winding up has been diminished by reason of the payment having been made.

(7) The foregoing debts shall—

(a) rank equally among themselves and be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions; and

(b) so far as the assets of the company available for payment of general creditors are insufficient to meet them, have priority over the claims of holders of debentures under any floating charge created by the company, and be paid accordingly out of any property comprised in or subject to that charge.

(8) Subject to the retention of such sums as may be necessary for the costs and expenses of the winding up, the foregoing debts shall be discharged forthwith so far as the assets are sufficient to meet them, and in the case of debts to which priority is given by paragraph (e) of subsection (2), formal proof thereof shall not be required except in so far as is otherwise provided by rules of court.

(9) Subject to subsection (10), in the event of a landlord or other person distraining or having distrained on any goods or effects of the company within 3 months next before the relevant date, the debts to which priority is given by this section shall be a first charge on the goods or effects so distrained on, or the proceeds of the sale thereof.

(10) In respect of any money paid under any such charge as is referred to in subsection (9), the landlord or other person shall have the same rights of priority as the person to whom the payment is made.

(11) Any remuneration in respect of a period of holiday, absence from work through sickness or other good cause shall be deemed to be wages in respect of services rendered to the company during that period.

(12) This section shall not apply in the case of a winding up where the relevant date occurred before the operative date, and in such a case, the provisions relating to preferential payments which would have applied if this Act had not been passed shall be deemed to remain in full force.

Effect of Winding Up on antecedent and other Transactions.