(a) That's right. If a company has limited liability, creditors are not guaranteed that they will be paid in full. Creditors may rely on the company generating sufficient profit to pay its debts in the ongoing course of business. But what happens if this ceases to be the case, and the accumulated assets of the company are inadequate to cover the debts in full? It is clear that some or all of the creditors will not be paid, either in full, or at all.
When a company becomes insolvent, there are many rules that apply. Some rules determine the order in which various types of creditor are entitled to be paid from the company's remaining assets. These rules give an advantage to certain types of creditor over others. However, it is possible for individual creditors to avoid the operation of these rules by arranging that the repayment of their own debt is specially secured.
There are different ways of securing the payment of a debt. One is to mortgage specific property (either property or chattels) in favour of a particular creditor, to secure a particular debt. The legal form of a mortgage varies depending on the property in question. Another form of security is to give the creditor a charge over particular property, specifying that property as available to secure repayment of the debt. A third type of security is a lien, which involves the creditor having and retaining possession of the debtor's property.