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GLOSSARY

Preferential creditor definition

What does Preferential creditor mean?

A creditor granted preferential status under the Insolvency Act 1986 entitled to receive payment in priority to others, eg employees of a company.

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Checklist for approval of Part 26 schemes and Part 26A restructuring plans involving HMRC

Checklist for approval of Part 26 schemes and Part 26A restructuring plans involving HMRC HMRC frequently ranks as a secondary preferential and/or unsecured creditor in a company’s formal insolvency (see Practice Note: Waterfall of payments—a comparative guide), which is often the relevant comparator/alternative to a Part 26 scheme/Part 26A restructuring plan. On 1 November 2023, HMRC published guidance on compromises using Part 26 schemes (see: Schemes of arrangement—overview) and Part 26A restructuring plans (see: Restructuring plan—overview) (see: HMRC publishes guidance on using debt management schemes to restructure finances—LNB News 15/11/2023 13). Practitioners will need to take note of the guidance where the proposed scheme/plan involves HMRC as creditor. The guidance states that HMRC will only offer support to companies to restructure where HMRC believes there is a realistic chance of success. If HMRC does not believe there is a realistic chance of succeeding, they will work with the scheme/plan proponent to try and find other ways to repay the debt owed to HMRC. They warn that this could include going...

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Table of priorities of creditors by country worldwide

Priorities of creditorsOn an insolvency, most countries have rules governing the order in which creditors can be paid out of the debtor's estate, sometimes know as the waterfall of payments. Certain categories of creditor may benefit from preferential status for all or part of their claim.If there are various possible countries where the restructuring/insolvency may be conducted, the different order of payment of creditors may be a relevant factor for deciding where to commence proceedings (see Practice Note: Forum shopping and practical ways to move COMI).CountryOrder of prioritiesLexology Panoramic Guide (see in particular Qs 38–41)Austria1. Preferential claims—costs of the insolvency proceedings, disbursement of expenses for the insolvency estate’s maintenance and management, certain early termination claims, claims for fulfilment of contracts that require performance by the debtor and the other party (provided that the insolvency administrator has decided to fulfil such contracts), the remuneration of certain creditors’ associations that participate in the proceedings, and pension deficiencies accrued after the opening of insolvency proceedings2. Secured creditors (claims of creditors whose claims arose...

An insolvency lawyer’s guide to the Financial Services Compensation Scheme

This Practice Note provides an overview of the role and operation of the Financial Services Compensation Scheme (FSCS) and the ranking of deposits protected by it in the waterfall of payments to creditors in the event of the insolvency of a relevant firm.For further information on the FSCS, see the following Practice Notes:•The Financial Services Compensation Scheme•Financial Services Compensation Scheme (FSCS)—the qualifying conditions for compensation•Financial Services Compensation Scheme (FSCS)—automatic assignment or subrogation of rights•Financial Services Compensation Scheme (FSCS)—payment or rejection of compensation, and•Financial Services Compensation Scheme (FSCS)—fundingRole and operation of the FSCSWhat is the FSCS?The FSCS was established by the Financial Services and Markets Act 2000 (FSMA 2000) as an independent body which provides protection to customers in the event of a financial institution or financial services firm becoming unable, or likely to be unable, to pay claims against it (ie it is ‘in default’). It is a statutory fund of last resort and will provide a degree of compensation if claims cannot be paid by anyone else.The Prudential Regulation...

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Restructuring and Insolvency weekly highlights—1 May 2025

This week's edition of Restructuring and Insolvency weekly highlights includes: the appointment of R3’s new president, Tom Russell, an analysis of the restructuring plan (RP) involving HMRC sanctioned for OutsideClinic Ltd, updated guidance for insolvency practitioners (IPs) dealing with regulated firms from the Financial Conduct Authority (FCA), plus a round-up of other news and cases for restructuring and insolvency professionals.

Restructuring Plan sanctioned for OutsideClinic Ltd (Re Outsideclinic Ltd)

Restructuring & Insolvency analysis: On 28 March 2025, the High Court of Justice sanctioned a restructuring plan proposed by OutsideClinic Ltd binding on seven classes of creditor, including HMRC in its capacity as a preferential creditor. Five of the seven classes of creditors voted in favour of the restructuring plan at the plan meetings. The sixth creditor abstained from voting and of the creditors in the seventh category (four in total), only one creditor holding 83% by value of the creditors in this category attended and voted prompting an interesting debate as to what constitutes a dissenting creditor and when cross class cram down (CCCD) should be invoked. This case also sent a key message to companies looking to compromise preferential debt due to HMRC by way of a restructuring plan, which is that, in the appropriate circumstances, HMRC is prepared to support, and vote in favour of restructuring plans. Written by Hannah Gaskell, principal associate, and Sarah Teal, partner & head of Manchester Office at Shoosmiths LLP (Shoosmiths LLP...

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386 Categories of preferential debts

386 Categories of preferential debts(1) A reference in this Act to the preferential debts of a company or an individual is to the debts listed in Schedule 6 to this Act [(contributions to occupational pension schemes; remuneration, &c of employees; levies on coal and steel production[; debts owed to the Financial Services Compensation Scheme][; deposits covered by Financial Services Compensation Scheme][; other deposits][; certain HMRC debts])]; and references to preferential

Preferential creditor is referenced 1 in UK Parliament Acts