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Top Five Questions for Creditors when a Company is Liquidated

Britain is a nation of small business owners - in the UK we rely on small to medium businesses like your own as they’re such a vital part of our economy.  Last year there were 5.7 million businesses in the UK and more than 99% of these were small or mediums sized businesses (employing 0 – 249 people).  A massive 5.5 million businesses were micro-businesses employing fewer than 10 people but accounting for 33% employment and 22% of turnover.  When it comes to business launches, 414,000 new businesses launched in 2017, compared with 328 business closures, meaning that business is still on the increase.  As for feminism, 21% of SMEs are led by a woman and in 28% of FTSE100 board members, 28% were female.

When it comes to business here in the UK, they are good for the economy, good for employment and good for customers so supporting our small businesses is a vital part of keeping the UK economy in good health.  However, one of the most common reasons that SMEs struggle to stay afloat is a chaotic cash flow that arises when they are owed money by customers, and this is especially true for small companies who supply larger, multi-national businesses, many of which have a habit of late payment or not paying at all.  Today, we’re going to take a look at the best questions that a small business owner should ask if a company they deal with has become insolvent.

  1. How can I confirm that a company has become insolvent?  If your debtor is not responding try searching the register at Companies House to see if insolvency has commenced.  You can also search the London Gazette’s insolvency section as some forms of procedure require advertisement of creditor meetings.
  2. What happens if I owe money?  Your debt will remain due and you will still need to remit the invoice in the ordinary way.  If you know that the company has been placed into liquidation or administration, contact the Insolvency Practitioner dealing with it to discuss payment arrangements.
  3. What happens if the company owes me money?  You can make a claim in the insolvency process, notice of which will be sent under separate cover.  If you know which Insolvency Practitioner is dealing with the arrangements, contact them to make sure they have your contact details.  Do not continue to supply the debtor as no claims relating to supply will be accepted after the date of insolvency.
  4. How much money will I get back, and when?  This depends on the procedure, asset values and the complexity of the case.  Some simple liquidations will take months, while more elaborate administrations may take years.  The Insolvency Practitioner will provide all stakeholders with regular reports and updates.
  5. What type of creditor am I?  Preferential Creditors – these are arrears of wages, accrued holiday pay, pension scheme contributions and some state benefit entitlements and will be given the highest priority.  A Secured Creditor has security registered at Companies House and will be paid after sale of the assets (when costs of sale have been deducted).  A secured creditor will take priority over other creditors once the costs of the insolvency and all preferential creditors have been fully paid.  Unsecured Creditors will be most creditors, including the remaining sums due to the employees outside of the Preferential Creditors and trade creditors.  Shareholders will only receive a distribution one all other expenses and creditors have been paid in full.