Distribution of assets in the winding up of an insolvent company:
1. Under Section 302 of the Companies Act, all costs, charges and expenses property incurred in the winding up including the liquidators remuneration are payable out of the assets of the company in priority to other claims.
2. Under Section 311(1) of the Act, the following payments must be made in priority to other debts.
All taxes and local rates due from the company is payable within 12 months before the commencement of winding up.
All government rents not more than one year in arrears
All wages and salaries due to any clerk or servant other than directors for services rendered during four months preceding commencement of winding up.
Any amounts payable under the NSSF and NHIF Act.
3. Secured creditors.
4. Unsecured creditors
5. Other creditors if any
6. The balance is distributed among members. Secured Creditors:
A secured creditors may:
1. Realise his security and prove as an unsecured creditor for the balance if any of his debt.
2. Value of the security and prove for any balance. In this case, the liquidator may redeem the security at the creditors value or require it to be sold.
3. Relay on his security and not prove at all. The liquidator may then redeem by payment in full.
4. Surrender his security and prove for the whole debt.