This article examines various ways in which suppliers of goods or finance to an ailing company can attempt to “jump the queue”. The queue in question is the ranking by priority of creditors in a winding up. Queue-jumping can be effected either by avoiding the queue altogether or by being at or near the head of the queue when it forms. Three methods of “jumping the queue” are considered in this article. It is argued that all three alter the position of the ordinary unsecured creditors. Moreover, they are invisible: for the most part unsecured creditors are given no notice of the existence of such arrangements. The idea that a company's unsecured creditors voluntarily accept the risk of its insolvency has been put forward on many occasions.1 However, the voluntary nature of this assumption of risk is far from obvious. The terms agreed between a company and its suppliers (of goods, services or finance) depend on a multitude of factors, not least the relative bargaining power of the parties. Suppliers of goods and services may be faced with the stark choice of supplying on credit or not at all. Suppliers of customer-specific goods may easily find themselves tied into a relationship with a particular customer as they have nowhere else to sell their products. Decisions about whether to commence or continue supplying a company may involve an assessment of the risk associated with becoming or continuing to be an unsecured creditor. However, the invisibility of the queue-jumping manoeuvres which other creditors may be employing could hamper attempts to assess this risk accurately.
|Number of pages||22|
|Journal||Journal of Business Law|
|Publication status||Published - Jan 1997|
- Trusts (Law)
- Corporate insolvency
- Resulting trusts
- Retention of title