Section 438, The Companies Act, 2009

(1) In a winding up there shall be paid in priority to allother debts– (a) all taxes and rates whether payable to the Government or to a local council, due from the company at the relevant date and having become due and payable within 12 months next before that date; (b) deductions under the National Social Security and Insurance Trust Act, 2001; (c) all wages or salaries of– 304 305 and removal of liquidators. Effect supervision Debts of all descriptions may be proved. of bankruptcy rules in Preferential payments. Act No. 4 of 2001. (i) any clerk or servant whether or not earned in part by way of commission; (ii) any workman or labourer in respect of services rendered to the company during a period of 12 months next before the relevant date; but where any labourer has entered into a contract for the payment of a portion of his wages in a lump sum at the end of the year of hiring, he shall have priority in respect of the whole of such sum, or a part as the court may decide to be due under the contract, proportionate to the time of service up to the relevant date; (e) unless the company is being wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another company or unless the company has at the commencement of the winding up under such a contract with insurers as is mentioned in section 28 of the Workmen’s Compensation Act, rights capable of being transferred to and vested in the workman, all amounts due in respect of any compensation or liability for compensation under the Workmen’s compensation Act accrued before the relevant date. (2) Where any compensation under the Workmen’s Compensation Act is a weekly payment, the amount due in respect thereof shall, for the purposes of paragraph (c) of subsection (1) be taken to be the amount of the lump sum for which the weekly payment could, if redeemable, be redeemed if the employer made an application for that purpose under that Act. (3) Where any payment on account of wages or salary has been made to any clerk, servant, workman or labourer in the employment of a company out of money advanced by some person for that purpose, that person shall, in a winding up have a right of priority in respect of the money so advanced and paid up to the amount by which the sum in respect of which that clerk, servant, workman or labourer would have been entitled to priority in the winding up has been diminished by reason of the payment having been made. (4) The debts referred to in subsection (1) shall– (a) rank equally among themselves and be paid in full, unless the assets are insufficient to meet them, in which case they shall abate in equal proportions; and (b) so far as the assets of the company available for payment of general creditors are insufficient to meet them, have priority over the claims of holders of debentures under any floating charge created by the company, and be paid accordingly out of any property comprised in or subject to that charge. (5) Subject to the retention of such sums as may be necessary for the costs and expenses of the winding up, the debts referred to in subsection (1) shall be discharged forthwith so far as the assets are sufficient to meet them. (6) In the event of a landlord or other person distraining or having distrained on any goods or effects of the company within three months next before the date of a winding-up order, the debts to which priority is given by this section shall be a first charge on the goods or effects so distrained on, or the proceeds of the sale, and in respect of any money paid under the charge, the landlord or other person shall have the same rights or priority as the person to whom the payment is made. (7) In this section the expression “the relevant date” means– (a) in the case of a company ordered to be wound up compulsorily which had not previously commenced to be wound up voluntarily, the date of the winding-up order; and 306 307 Cap 219 Cap 219 (b) in any other case, the date of the commencement of the winding-up. Effect of winding-up on antecedent and other transactions