This schedule deals with creditors that have a priority claim to proceeds of realisations from a company in liquidation.

While many creditors are aware that this schedule gives priority in the main to employees and the IRD, there are several key points to note:

Employee Claims

Clause 1 1(2) Covers employee claims. Not all employee claims are preferential. What is covered is as follows:

  • employees’ wages or salary (including commissions, time or piece of work) in respect of services provided to the company during the four months preceding the commencement of the liquidation;
  • holiday pay payable to an employee on the termination of the employment before or because of the commencement of the liquidation;
  • compensation for redundancy owed to an employee that accrues before, or because of, the commencement of the liquidation;
  • amounts deducted by the company from the wages or salary of any employee in order to satisfy obligations of the employee;
  • any reimbursement or payment provided for or ordered by, the Employment Relations Authority, the Employment Court, or the Court of Appeal under s 123(1) (b) or s128 of the Employment Relations Act 2000, to the extent that the reimbursement or payment does not relate to any matter set out in s 123(1) (c) of the Employment Relations Act 2000, in respect of wages or other money or remuneration lost during the four months before the commencement of liquidation.

The maximum claim per employee is now $22,160, following an increase from the previous level $20,340, which applied prior to 30 September 2015.

Unsecured Creditors

All will be aware unsecured creditors fall to the bottom of the queue. However there is an exemption under clause 1 1(e) where any creditor who protects, preserves the value of, or recovers assets of the company for the benefit of the company’s creditors by the payment of money or the giving of an indemnity, they are entitled to:

  1. the amount received by the liquidator by the realisations of those assets, up to the value of that creditor’s      unsecured debt; and
  2. the amount of the costs incurred by that creditor in protecting, preserving the value of, or recovering those assets.

Right of Subrogation

Where any party makes a payment towards a preferential debt that would normally be claimed as a priority debt under the 7th Schedule, they have the rights of subrogation pursuant to clause 4.

It is recommended any party advancing funds to a company to meet employee or IRD preferential debts, should have this documented and put in place procedures to ensure funds advances are only utilised for this purpose.

       For further information please contact Tom Rodewald on 021 22 77 408