Updated: 2nd December 2021
If you are owed money by an insolvent company, your options vary according to the level of debt, and the lengths you are prepared to go to recover your money.
The most drastic creditor action you can take against a company is the compulsory winding-up process, which is often seen as a measure of last resort. In consideration of the fees involved, we will investigate this option first to put other measures into more context.
This process involves closure of the debtor company, and the realisation of all their assets in order to repay you and other creditors who may have a claim.
It can be a costly option for you as the petitioner, however, with fees currently standing at:
This is why the option to compulsory wind up a company is generally only taken if a substantial debt is present – usually well above the £750 minimum level required. This figure has increased to £10,000 as per the Government's temporary measures which will apply for the period 1 October 2021 to 31 March 2022. It may be possible to recoup the costs if the insolvent company can afford them, but otherwise you will have to pay.
To be eligible for this process, there must be an undisputed debt exceeding £750 (temporarily £10,000). One of the ways to prove the existence of this debt is to issue a 21-day Statutory Demand for Payment of the monies owed.
Failure by the company to respond to this demand is proof that the debt exists, and makes your application for a winding up order more straightforward. Once the order has been granted by the courts, a liquidator will be appointed to proceed with the winding up of your debtor’s company.
If you are open to negotiation with your debtor and would agree to receive a reduced amount, a Company Voluntary Arrangement may be a good option. This would mean that no further legal action could be taken against your debtor, in return for regular monthly payments towards the debt owed.
You will be unable to make other charges or demand interest on the debt once the terms of a Company Voluntary Arrangement are agreed, and although you will not receive all monies owed, your returns may be higher using a CVA than with the liquidation process described above.
An additional advantage over compulsory winding up is that the debtor company pays for the CVA process.
Begbies Traynor has vast experience in dealing with Company Voluntary Arrangements, and our experts can advise on whether this is the best option in your circumstances.
This insolvency procedure is generally instigated by the directors of a company unable to meet its financial obligations. As one of their creditors, you attend a meeting to vote on the terms of the Creditors’ Voluntary Liquidation, and are able to put questions to the directors.
A Statement of Affairs is presented at this meeting which summarises their position, and will help you judge whether or not you should agree to the CVL. One of the downsides of this option as far as you are concerned, is the fact that their assets may be sold at reduced values because of the need for a quick sale.
This sometimes results in lower returns for creditors than may otherwise be achieved using a different route. Having said that, the Insolvency Practitioner dealing with the process is required by law to put creditor interests first.
You can apply to the courts for bailiff action in the form of ‘taking control of goods’ (previously known as ‘walking possession’). This essentially means that goods to the value of your debt may be seized and sold at auction, after having officially proven that the debt exists.
If someone else has petitioned for your debtor to be wound up, you will need to register with the Insolvency Practitioner as a creditor. To do this you should complete a Proof of Debt form, which unfortunately does not guarantee any return of monies, but allows you to vote in a creditors’ meeting, and keep abreast of any developments.
This generally means receiving reports about the assets sold and values realised. You will also be invited to attend a final creditors’ meeting in some cases, during which the Insolvency Practitioner dealing with the process will explain more about the distribution of monies.
Begbies Traynor provides advice to creditors on the best way to recoup their monies from an insolvent company. We operate from an extensive UK office network, and can arrange a same-day consultation.