(1)The following applies in the case of a company, where a receiver is appointed on behalf of the holders of any debentures of the company secured by a charge which, as created, was a floating charge.
(2)If the company is not at the time in course of being wound up, its preferential debts (within the meaning given to that expression by section 386 in Part XII) shall be paid out of the assets coming to the hands of the receiver in priority to any claims for principal or interest in respect of the debentures.
(3)Payments made under this section shall be recouped, as far as may be, out of the assets of the company available for payment of general creditors.
Cases considering section 40 9
[2004] UKHL 9 · 4 March 2004Interprets
The receiver regime gives preferential debts priority over principal and interest secured by a charge which, as created, was floating. It is the technically applicable regime because receivers were appointed before the winding up, but it does not make general winding-up expenses payable from charged assets.
Payments of preferential debts from the charged fund are recoupable, so far as possible, from assets available to general creditors. The provision supports the conclusion that free assets are the primary source for preferential debts and that the statute does not transfer general liquidation expenses to the charged fund.
[2004] EWCA Civ 670 · 12 July 2004
Applies the priority for preferential debts from assets in a receiver’s hands where the debenture charge was floating. The statutory distinction makes the charge’s legal character decisive. (see paras [21]; [38])
[2002] EWCA Civ 228 · 22 February 2002Limits
Held not to establish a self-contained or exclusive regime. Assets remaining unapplied after receivership may also fall within section 175(2)(b) on a subsequent liquidation. (see The position after the changes enacted in the Insolvency Act 1986; Conclusion)
What each judgment says about section 40 is in the case-law panel in the full Act.