What is the difference between a secured and an unsecured creditor, and are there any other kinds of creditors?

Secured creditor: Has a registered, secured charge against the assets of the company. Examples are a mortgage or pledge of some kind.

  • Unsecured creditor: Does not have a secured charge.
  • Employees: Are a special class of unsecured creditors. Employees who have made claims for wages, salaries and/or other entitlements, once accepted by the Liquidator, are given priority over the claims of other unsecured creditors.

 The order of priority for payment of dividends is:

  • Rates and taxes
  • Cost and expenses of winding up
  • Preferential debts e.g. wages/salaries, workmen’s compensation/leave entitlement
  • Floating charges e.g. debentures (secured charge)
  • Ordinary unsecured creditors e.g. judgment creditors, general body of creditors
  • Members/shareholders (only when creditors have been paid in full)

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