THE CORPORATIONS LAW

CHAPTER 5 - EXTERNAL ADMINISTRATION

PART 5.6 - WINDING UP GENERALLY

Division 6 - Proof and ranking of claims

Subdivision D - Priorities

SECTION 556   PRIORITY PAYMENTS  

556(1)  [Priority debts and claims]  

Subject to this Division, in the winding up of a company the following debts and claims must be paid in priority to all other unsecured debts and claims:

(a)  first, expenses (except deferred expenses) properly incurred by a relevant authority in preserving, realising or getting in property of the company, or in carrying on the company's business;

(b)  if the Court ordered the winding up - next, the costs in respect of the application for the order (including the applicant's taxed costs payable under section 466);

(c)  next, the debts for which paragraph 443D(a) entitles an administrator of the company to be indemnified (even if the administration ended before the relevant date), except expenses covered by paragraph (a) of this subsection and deferred expenses;

(d)  if the winding up began within 2 months after the end of a period of official management of the company - next, debts of the company properly incurred by an official manager in carrying on the company's business during the period of official management, except expenses covered by paragraph (a) of this subsection and deferred expenses;

(da)  if the Court ordered the winding up - next, costs and expenses that are payable under subsection 475(8) out of the company's property;

(db)  next, costs that form part of the expenses of the winding up because of subsection 539(6);

(dc)  if the winding up began within 2 months after the end of a period of official management of the company - next, the remuneration, in respect of the period of official management, of any auditor appointed in accordance with Part 2M.4;

(dd)  next, any other expenses (except deferred expenses) properly incurred by a relevant authority;

(de)  next, the deferred expenses;

(df)  if a committee of inspection has been appointed for the purposes of the winding up - next, expenses incurred by a person as a member of the committee;

(e)  subject to subsection (1A) - next, wages and superannuation contributions payable by the company in respect of services rendered to the company by employees before the relevant date;

(f)  next, amounts due in respect of injury compensation, being compensation the liability for which arose before the relevant date;

(g)  subject to subsection (1B) - next, all amounts due:

(i) on or before the relevant date; and

(ii) because of an industrial instrument; and

(iii) to, or in respect of, employees of the company; and

(iv) in respect of leave of absence;

(h)  subject to subsection (1C) - next, retrenchment payments payable to employees of the company.

556(1A)  [Maximum payable to excluded employee under sec 556(1)(e)]  

The amount or total paid under paragraph (1)(e) to, or in respect of, an excluded employee of the company must be such that so much (if any) of it as is attributable to non-priority days does not exceed $2,000.

556(1B)  [Maximum payable to excluded employee under sec 556(1)(g)]  

The amount or total paid under paragraph (1)(g) to, or in respect of, an excluded employee of the company must be such that so much (if any) of it as is attributable to non-priority days does not exceed $1,500.

556(1C)  [Payment under sec 556(1)(h)]  

A payment under paragraph (1)(h) to an excluded employee of the company must not include an amount attributable to non-priority days.

556(2)  [Interpretation]  

In this section:

``company'' means a company that is being wound up;

``deferred expenses'' , in relation to a company, means expenses properly incurred by a relevant authority, in so far as they consist of:

(a)  remuneration, or fees for services, payable to the relevant authority; or

(b)  expenses incurred by the relevant authority in respect of the supply of services to the relevant authority by:

(i) a partnership of which the relevant authority is a member; or

(ii) an employee of the relevant authority; or

(iii) a member or employee of such a partnership; or

(c)  expenses incurred by the relevant authority in respect of the supply to the relevant authority of services that it is reasonable to expect could have instead been supplied by:

(i) the relevant authority; or

(ii) a partnership of which the relevant authority is a member; or

(iii) an employee of the relevant authority; or

(iv) a member or employee of such a partnership;

``employee'' , in relation to a company, means a person:

(a)  who has been or is an employee of the company, whether remunerated by salary, wages, commission or otherwise; and

(b)  whose employment by the company commenced before the relevant date;

``excluded employee'' , in relation to a company, means:

(a)  an employee of the company who has been:

(i) at any time during the period of 12 months ending on the relevant date; or

(ii) at any time since the relevant date;

or who is, a director of the company;

(b)  an employee of the company who has been:

(i) at any time during the period of 12 months ending on the relevant date; or

(ii) at any time since the relevant date;

or who is, the spouse of an employee of the kind referred to in paragraph (a); or

(c)  an employee of the company who is a relative (other than a spouse) of an employee of the kind referred to in paragraph (a);

``non-priority day'' , in relation to an excluded employee of a company, means a day on which the employee was:

(a)  if paragraph (a) of the definition of ``excluded employee'' applies - a director of the company; or

(b)  if paragraph (b) of that definition applies - a spouse of an employee of the kind referred to in paragraph (a) of that definition; or

(c)  if paragraph (c) of that definition applies - a relative (other than a spouse) of an employee of the kind referred to in paragraph (a) of that definition;

even if the day was more than 12 months before the relevant date;

``official manager'' includes a deputy official manager;

``relevant authority'' , in relation to a company, means any of the following:

(a)  in any case - a liquidator or provisional liquidator of the company;

(b)  if the winding up began within 2 months after the end of a period of official management of the company - an official manager appointed for the purposes of the official management;

(c)  in any case - an administrator of the company, even if the administration ended before the winding up began;

(d)  in any case - an administrator of a deed of company arrangement executed by the company, even if the deed terminated before the winding up began;

``retrenchment payment'' , in relation to an employee of a company, means an amount payable by the company to the employee, by virtue of an industrial instrument, in respect of the termination of the employee's employment by the company, whether the amount becomes payable before, on or after the relevant date;

``spouse'' includes a de facto spouse;

``superannuation contribution'' , in relation to a company, means a contribution by the company to a fund for the purposes of making provision for, or obtaining, superannuation benefits for an employee of the company, or for dependants of such an employee.