Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Waterfall definition

What does Waterfall mean? In legal practice, a waterfall is the order in which available funds are applied to debts when insolvency, enforcement or a payment default occurs. It describes who gets paid, in what sequence, and from which recoveries. ‘Waterfall’ is not a statutory term; it is a descriptive and contractual concept. The underlying order of priority may arise from legislation and case law (the statutory insolvency waterfall) or from contract (for example, in intercreditor agreements, security trust deeds and structured finance documents). Typical features include: specifying categories and sequencing; earmarking particular proceeds; and dealing with turnover, set-off and subrogation. In practice it allocates...

Corporate liquidation waterfall and priority of claims: fixed/floating charges, moratorium and preferential debts, expenses, prescribed part, unsecured and subordinated claims, interest (England and Wales)

Published by a LexisNexis Restructuring & Insolvency expert

Practice notes

The sequence for distributing assets in a winding up, after secured creditors (other than holders of floating charges) have realised their security for themselves, is expressly set out in the Insolvency Act 1986 (IA 1986) and the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024.

Fixed charge holders

Sums realised from assets subject to a fixed charge, as granted, are payable to the fixed charge holder, subject to deduction of the liquidator’s costs of realisation. A security that began life as a floating charge but has converted into a fixed charge, e.g. through crystallisation or a notice of conversion prior to the relevant date in IA 1986, s 387, ranks behind preferential debts.

Moratorium debts and priority pre-moratorium debts

The Corporate Insolvency and Governance Act 2020 (CIGA 2020) inserted Part A1 into IA 1986, introducing a procedure allowing directors of insolvent companies, or those likely to become insolvent, to obtain a moratorium of 20 business days. It is intended to allow otherwise viable businesses time to restructure or secure new investment free from creditor action. If a Liquidation follows within 12 weeks of a moratorium, any moratorium debts and ‘priority pre-moratorium debts’ for which the company did not have...

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Web page updated on 21/05/2026

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