Rule of rank meaning

In both corporate and personal insolvency, office-holders chiefly gather the company’s or individual’s assets, realise them and distribute the proceeds to creditors in accordance with the statutory waterfall. For more detail, consult the following Practice Notes: Waterfall of payments—a comparative guide Waterfall of payments in administration Waterfall of payments in liquidation Waterfall of payments in bankruptcy Waterfall of payments in administrative receivership Pari passu distribution Pari passu, a Latin term, translates as ‘with an equal step’ or ‘on equal footing’. In insolvency, it captures the principle of proportionality and is used to describe how creditors are treated relative to one another. Where claims rank ‘pari passu’, all creditors within the same class are paid alike, with no one preferred. If funds are insufficient to satisfy debts in full, distributions are made pro rata on a pari passu basis, so each receives a proportionate return. For instance, unsecured creditors (ie creditors in the same category) might receive 10p...

Loan market and developments The loan landscape has shifted in response to the economic and financial downturn. That crisis exposed weaknesses in a corporate funding paradigm built predominantly on bank lending, underscoring the requirement for alternative financing channels. According to the Bank of Italy, lending contracted during the crisis, most notably for SMEs, confirming the Italian market’s negative trajectory despite greater liquidity across the system. With fewer loans available, transactions were predominantly arranged as club deals or as bilateral facilities, while only a small number of financings were arranged on a syndicated basis. These patterns emerged notwithstanding the notable increase in liquidity within the system. Syndicated transactions were the exception rather than the rule, appearing only in limited circumstances. The Italian market nevertheless experienced some activity in the issuance of bonds by large corporates outside the banking sector, providing a partial and pragmatic route to funding. Over the last few years, however, and from a general perspective, the Italian banking sector has been strengthening. That improvement is seen above...

Throughout this Practice Note, the terms ‘borrower’ and ‘mortgagor’ are treated as equivalent, and likewise ‘lender’ and ‘mortgagee’. This Practice Note applies to fixed charges as well, although it does not examine the marginal practical distinction between a fixed charge and a mortgage—see Practice Note: Mortgages for further reading on this topic. Priority of mortgages over registered land Under registered land, where several loans are secured over the same property by separate mortgages, each mortgagee is entitled to be paid out of the sale proceeds strictly and in accordance with the mortgages’ order of priority. The basic rule is that any two charges rank in the sequence of their creation (Millet J in Macmillan Inc v Bishopsgate Investment Trust plc (No 3))...