A-company-which-owes-me-money-has-gone-into-liquidation

How can I reclaim money from a liquidated company? 

When a company undergoes liquidation, it terminates its existence as a legal entity. Consequently, any outstanding liabilities (or debts) at the time of liquidation are dissolved along with the company. 

During the liquidation process, the appointed insolvency practitioner aims to maximise funds from company assets, which are then distributed to creditors. However, it’s common for unsecured creditors to receive minimal proceeds from the distribution.

 

Managing Insolvency of a Creditor: Actionable Considerations

When a company enters liquidation, its assets are sold by the designated liquidator to settle debts owed to creditors. Regrettably, unsecured creditors typically receive only a fraction of the amount owed, as they are prioritised at the bottom of the payment ‘hierarchy’ in insolvency proceedings.

This often results in minimal or no funds remaining after higher-ranking creditor groups have been compensated. However, if you’re a supplier with a retention of title claim, there’s a possibility of reclaiming the goods supplied to your insolvent customer.

 

Classifying Your Creditor Type

If you’ve provided a loan to the company secured against one of its assets, you’re considered a secured creditor and have the right to sell the asset to recoup the debt owed to you. However, if you’re a supplier to the insolvent business, you’re classified as an unsecured creditor and are placed lower in the priority order for payment.

While unsecured creditors typically receive limited returns from the liquidation process, there may be steps you can take to potentially improve your situation.

 

Submitting a Claim: Procedures and Requirements

Firstly, you should reach out to the appointed liquidator and inform them that the company owes you money. The liquidator will furnish you with a ‘proof of debt’ form to fill out, which will require information such as the amount owed, the nature of the debt, and any security held.

Upon receiving the completed form, the liquidator will keep you informed about the progress of the proceedings and provide updates as necessary. Therefore, it’s vital to ensure that the officeholder possesses your current contact details. Additionally, you’ll receive a report outlining the circumstances leading to the company’s insolvency, along with estimates of its assets and liabilities.

 

Retention of title clause (ROT)

If you’re a supplier, you might have included a retention of title clause in your contract with the company. If so, it’s important to inform the liquidator of this clause along with your claim.

A valid retention of title clause could grant you the right to reclaim the goods if it can be demonstrated that ownership remains with your business until payment is received from the buyer. It’s advisable to notify the liquidator of the clause as soon as possible, and they will send you a retention of title questionnaire.

You’ll be required to provide documentary evidence supporting the existence of the clause. If your claim is validated, you should be able to retrieve your goods from the insolvent customer.

 

Creditors’ committee

Creditors possess the entitlement to establish a creditor’s committee, typically comprising three to five members. Typically, creditors with the highest claims are nominated, aiming to provide unsecured creditors with representation during the liquidation process.

The committee approves various decisions made by the liquidator, such as the remuneration of the officeholder. If there’s a need to negotiate a compromise or alternative agreement with creditors, or regarding the debts owed, the creditors’ committee will be consulted concerning these new arrangements.

 

How much of your debt will you recover from the company?

The liquidation process as a whole can be quite lengthy, especially if the company has numerous assets or a complex business structure. However, if the liquidated company possesses few assets and there’s no valid retention of title (ROT) clause, regrettably, you may not receive any compensation from the liquidation.

 

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The Liquidator’s Right to Reject Claims

If you fail to provide adequate proof of a debt’s existence, the liquidator may reject your claim. It’s crucial to complete the proof of debt form with thorough detail and be ready to substantiate your claim with supporting documentation if required.

Your claim, whether in whole or in part, can be declined, but the liquidator must justify their decision. If you’re dissatisfied with the outcome, you have the option to seek legal assistance and apply to the court to challenge or amend the decision.

Vanguard Insolvency offers tailored professional advice for individuals owed money by companies in liquidation. With extensive expertise in this field, we ensure you comprehend your rights throughout the process. Contact one of our specialists to arrange a complimentary same-day consultation. We provide director advice online, over the phone, or in person at our network of UK offices or a location convenient for you.

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.