The creditors that are owed money by an insolvent business are organised into classes, depending on the type of debt they are owed, which are put into order of priority. This priority is laid out by the Insolvency Act 1986 and is as follows:

• Fixed charge / secured creditors - often banks, mortgage lenders or lenders where the finance is secured on property, land or equipment.

• Preferential creditors - such as employees that are owed for things like arrears of wages, holiday pay and pension contributions. This class can also include HMRC if they are owed money.

• The prescribed part - a portion of funds ringfenced for unsecured creditors, which will usually be a percentage (or part) of what is owed, rather than the whole sum.

• Floating charge creditors - those creditors who lent on assets that are not secured, but may change in value and quantity, such as stock, fixtures and fittings etc.

• Unsecured creditors - usually a pro-rata payment to unsecured creditors, depending on how much they are owed. Often suppliers, employees, customers and contractors fit into this class.

• Interest on the debts - creditors are entitled to be paid statutory interest on what is owed to them if there are sufficient funds released from asset realisation to enable this.

• Shareholders - the final creditors in the hierarchy are shareholders of the insolvent company, who will only be paid after everyone above them and only if there are surplus funds to do so. In most insolvencies, there is no surplus at this point.

If you want some assistance either with realising assets for an insolvent company, or are a creditor wanting to make sure that you are at the right place in the hierarchy, the team at Forbes can help.