Administrative priority creditors do not rank ahead of a secured creditor with respect to its security interest, but generally are afforded a first priority (see chap. V, paras. 45 47 and 66) that ranks ahead of ordinary unsecured creditors and any statutory priorities, for example, taxes or social security claims.

In addition, it was noted that priority under the draft Convention gave a creditor only the right to be paid before other creditors that were subsequent in the line of priority.

Priority of the security right over the rights of competing claimants

The insolvency law should establish the priority that may be accorded to post commencement finance, ensuring at least the payment of the post commencement finance provider ahead of ordinary unsecured creditors, including those unsecured creditors with administrative priority.

The super priority ranks ahead of administrative creditors.

With respect to the question of establishing equal treatment between foreign and local creditors quot of the same priority quot , it was noted that definitions and classes of priority of creditors varied greatly from country to country and that it would not be feasible to require that the court of the enacting State should apply to foreign creditors the priority rules of their respective foreign laws.

Proposals were made to replace the words quot secured claims quot and quot rights in rem quot , with reference to quot privileged claims quot , quot preferred claims quot or other expressions with a similar meaning.

Priority between the assignee and the insolvency administrator or creditors of the assignor

(b) Provide a temporal event for ordering priority among secured creditors and between a secured creditor and other classes of competing claimants.

(h) Recognize existing creditors rights and establish clear rules for ranking of priority claims.

A more desirable approach may be to provide that creditors obtaining priority for new funding will retain that priority in any subsequent liquidation.

Nevertheless, the claims of foreign creditors other than those concerning tax and social security obligations shall not be ranked lower than identify the class of unsecured non preference claims, while providing that a foreign claim is to be ranked lower than the unsecured non preference claims if an equivalent local claim (e.g. claim for a penalty or deferred payment claim) has a rank lower than the unsecured non preference claims . quot

Some insolvency laws provide that new lending may be afforded some level of priority over existing secured creditors, (sometimes referred to as a priming lien ).

A note of caution was struck, however, in that regard, to the effect that such laws needed to strike an appropriate balance in the treatment of privileged, secured and unsecured creditors so as to become acceptable to States.

quot (3) An assignee has priority over an insolvency administrator and creditors of the assignor, including creditors attaching the assigned receivables, if

quot (4) An assignee has priority over an insolvency administrator and creditors of the assignor, including creditors attaching the assigned receivables, if

A security right will have little or no value to a creditor unless the creditor is able to ascertain, at the time a transaction takes place, its priority in the property relative to other creditors (including an insolvency representative).

If the secured creditor is the depositary bank, the depositary bank's security right has priority over any other security right.

The law should provide that a security right that is effective against third parties has priority over the rights of unsecured creditors.

Where the insolvency law establishes the level of priority that generally can be given, for example, an administrative priority, court approval may not be required.

Note to the Working Group The commentary will provide examples of exceptions, such as post commencement priority financings and privileged claims.

The law should provide that a secured creditor with a security right that is not effective against third parties has towards third parties no right other than as an unsecured creditor priority over unsecured creditors unless the unsecured creditor has taken steps to reduce its claim to a judgement or the grantor has become insolvent .

Since, at the time of eventual distribution, the extent to which the secured creditor will receive priority will be limited by the value of the encumbered asset, that depreciation can prejudice the secured creditor.

The concept of priority, which allows for the concurrent existence of security rights having different priority status in the same assets, makes it possible for a business to utilize the value of its assets to the maximum extent possible by obtaining secured credit from more than one creditor using the same assets as security with transparent rules allowing each creditor to know the priority of its security right.

(a) Enable a potential secured creditor to determine, in an efficient manner and with a high degree of certainty prior to extending credit, the priority that the security rights would have over competing claimants and

The insolvency law should specify that, if a security right is entitled to priority under law other than the insolvency law, that priority continues unimpaired in insolvency proceedings except if, pursuant to the insolvency law, another claim is given priority.

A note of caution was struck, however, in that regard to the effect that such laws needed to strike an appropriate balance in the treatment of privileged, secured and unsecured creditors so as to become acceptable to States.

The insolvency law should specify that, where the existing secured creditor does not agree, the court may authorize the creation of a security interest having priority over pre existing security interests provided specified conditions are satisfied, including

This amount remains fixed throughout the proceedings and, upon distribution following liquidation, the secured creditor receives a first priority claim to the extent of that amount.

In States where this latter type of priority is permitted, insolvency courts recognize the risk to the existing secured creditors and authorize these types of priority reluctantly and as a last resort.

However, the Working Group was urged to consider such protective measures in a manner that ensured the equality of creditors, rather than establishing a preferential treatment of local creditors to the detriment of foreign creditors.

With regard to conflicts of priority between the assignee and the assignor apos s creditors, the suggestion was made that they should be governed by the law of the country in which the assignor had its place of business.

(4) An assignee asserting priority under the provisions of this Convention has priority over an assignee asserting priority based on grounds other than the provisions of this Convention.

Because secured transactions affect the interests of various persons, including the debtor, other grantors, competing creditors, such as secured, privileged and unsecured creditors, purchasers and other transferees, and the State, the Guide proposes rules that take into account their legitimate interests and seek to achieve, in a balanced way, all the objectives mentioned above.

6. Affirms that debt repayments should not take precedence over the basic rights of the people of debtor countries to food, shelter, clothing, employment, health services and a healthy environment

(ff) Priority means the right of a person to derive the economic benefit of its security right in an encumbered asset in preference to a competing claimant.

Priority among several assignees

(188) The insolvency law should specify that secured claims should be satisfied from the encumbered asset in liquidation or pursuant to a reorganization plan, subject to claims that are superior in priority to the secured claim, if any.

Other approaches involve classifying intra group transactions differently from similar transactions conducted between unrelated parties (e.g. a debt may be treated as an equity contribution rather than as an intra group loan), with the consequence that the intra group obligation will rank lower in priority than the same obligation between unrelated parties.

The law should provide that a secured creditor's priority with respect to an encumbered asset extends to the proceeds of the asset subject to the requirements of recommendation 54.

In those cases where there are no unencumbered assets, or no excess value in already encumbered assets, that the debtor can offer as security or with which the debtor can satisfy an administrative expense priority claim, the debtor has limited options.

However, where the security or priority to be given affects the interests, for example, of existing secured creditors and those secured creditors do not support what is proposed, approval of the court should be required.

Network Priority

The law should limit, both in number and amount, preferential claims that have priority over security rights that are effective against third parties, and to the extent preferential claims exist, they should be described in the law in a clear and specific way.

(g) Priority means the right of a person in preference to the right of another person and, to the extent relevant for such purpose, includes the determination whether the right is a personal or a property right, whether or not it is a security right for indebtedness or other obligation and whether any requirements necessary to render the right effective against a competing claimant have been satisfied