Chris is an Insolvency Practitioner regulated by the ICAEW since 2014,.
He is experienced in contentious insolvency with excellent analytical skills and strong knowledge of both general and technical insolvency matters.
When a company enters liquidation, recovering your money can be challenging. Your chances depend largely on your creditor status and the company’s available assets.
A creditor is anyone to whom the company owes money. This could be a supplier who hasn’t been paid for goods, a lender who provided a loan, or even an employee owed wages. Your status as a creditor is crucial because it determines your place in the repayment queue.
The Insolvency Act 1986 establishes a clear hierarchy of creditors, which significantly influences the order and extent of debt repayment. This hierarchy ensures that available funds are distributed fairly, but it also means that some creditors may receive more than others.
Creditor Classification in Insolvency Proceedings
Secured creditors (e.g., banks with loans secured against company assets) have the best chance of recovering their money. If you fall into this category, you’re likely to recover at least a portion of what you’re owed.
Preferential creditors, including employees owed wages and HMRC for certain taxes, come next. If you’re an employee, you may recover some unpaid wages and holiday pay.
Unsecured creditors, such as suppliers or customers with deposits, often face the greatest uncertainty. If you’re in this group, full repayment is unlikely, but you may receive a partial payment depending on the company’s remaining assets.
Check if you have a valid retention of title clause (for suppliers)
Review any credit insurance policies you may have
While full repayment is often unlikely, especially for unsecured creditors, you may receive a dividend from the liquidation. Stay engaged with the insolvency process and seek professional advice if you’re unsure about your rights or options in the creditors’ voluntary liquidation or compulsory liquidation.
Remember, understanding your position and the winding-up procedure can help you navigate this challenging situation more effectively.
FAQs: Recovering Money from a Company in Liquidation
How likely am I to get my money back if a company I’m owed money by goes into liquidation?
Your chances depend on your creditor status and the company’s available assets. Secured creditors are most likely to recover funds, while unsecured creditors often face uncertainty.
What should I do immediately if I hear a company that owes me money is going into liquidation?
Contact the appointed liquidator as soon as possible to register your claim. Submit your proof of debt promptly when requested.
I’m an employee of a company going into liquidation. Will I get my unpaid wages?
As an employee, you have strong protections. The Redundancy Payments Service (RPS), a government agency, will typically cover:
Up to 8 weeks of unpaid wages (capped at £571 per week as of 2024)
Up to 6 weeks of holiday pay
Statutory notice pay
Statutory redundancy pay
Any amounts exceeding these limits become preferential debts in the liquidation. You’ll need to claim directly from the RPS, usually with assistance from the appointed insolvency practitioner. While there may be a short wait, this system ensures you’re likely to receive a significant portion of what you’re owed, even if the company has limited assets.
I paid a deposit for goods or services. Can I get it back if the company goes into liquidation?
As an unsecured creditor, full recovery is unlikely. However, you may receive a partial refund depending on the company’s remaining assets after paying secured and preferential creditors.
References
The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.
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