What is the Meaning of a ‘Small Debt’ in a CVL?

The liquidator’s role in a Creditors’ Voluntary Liquidation (CVL), amongst other things, is to invite and adjudicate formal claims from creditors for money they are owed by the insolvent company. Once the assets of the insolvent company have been sold, the proceeds can then be distributed to the company’s creditors, less the costs of the liquidation. If there is any surplus, a dividend can also be distributed to the company’s members.

As an unsecured creditor of the insolvent business, once you have submitted your claim against the company along with your proof of the debt, the liquidator will decide whether to accept the claim in whole, in part or reject it. If accepted, you will receive a dividend paid pro-rata at the end of the liquidation. In some cases, the dividend paid to unsecured creditors could be as little as just a few pence in the pound as secured creditors and preferential creditors will always be paid first.

New Provisions for Debts of Less Than £1000

The new Insolvency Rules, which came into force on 6 April 2017, include provisions that allow distributions to unsecured creditors without a formal claim for ‘small debts’ of less than £1000. The rules state that where an officer (liquidator) is able to rely on the information contained in the company’s statement of affairs or accounting records, those debts recorded below the limit of £1000 can be treated as proven without requiring any input from the creditor.

In practice, rather than asking for a formal claim to be made, the liquidator can simply send a notice of the dividend to be paid to the creditor in respect of the small debt. If the creditor does not respond to the notice to inform the liquidator that the debt amount is incorrect or not due, the debt is deemed to be proven and the dividend will be paid. This truncated process helps to limit the costs of the Creditors’ Voluntary Liquidation procedure.

Need Advice?

Are you the creditor of a company that has recently entered a Creditors’ Voluntary Liquidation? Perhaps you’re a company director considering whether a CVL is right for you? Whatever your circumstances, please call 08000 746 757 or email: info@companydebt.com for the free, no-obligation assistance you need.

Recent News
Schedule a callback
Unfortunately, we are unavailable at the moment, but we can schedule a callback