Preferential creditors

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-01

// THE SHORT ANSWER

Preferential creditors are the claims the law pays ahead of ordinary unsecured creditors in an insolvency — chiefly employees' unpaid wages and holiday pay and, in some countries, certain taxes. In New Zealand, Australia and the United Kingdom they also rank ahead of a lender's security over circulating assets such as stock and receivables. That is why a desk reads a borrower's wage bill and tax position as a deduction from what its security over working assets would recover: that security can be worth much less on the day of failure than its book value, before a single debtor disputes an invoice.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.