When faced with the issue of being owed money by an insolvent company, it’s crucial that you are aware of what options are available to you. The most suitable option will vary for different creditors, depending on how much money you are owed and the urgency with which you need to get it back. This article will go over each of these options, explaining how they work and under what circumstances they would be the appropriate course of action.
Taking control of goods
Introduced in 2013, the Taking Control of Goods regulation allows creditors who are owed money the ability to apply to the courts for bailiff action, through which you are able to forcibly seize goods equal to the amount of debt you are owed and sell them at auction. Often the mere threat of this action will encourage the company in question to make payment, which makes it a good first step to take if you are owed money by an insolvent company. However, if payment is still not received, you may have to actually seize goods and sell them at auction in order to recover the money.
Compulsory winding-up
The process of compulsory liquidation, or ‘winding-up’, is the most drastic course of action that a creditor can take when owed money by an insolvent business. This procedure takes place through the High Court and sees that a business’ assets are all realised and distributed to its creditors, after which the company will be completely dissolved. Compulsory winding-up is usually the last resort when owed money by an insolvent company. This isn’t just because the business in question will be forced to disband, but also due to the fees that it comes with. Currently, the court fees stand at £302, and the cost of the winding-up petition is £1,600. Due to these fees, repayment through compulsory winding-up is only pursued when the debts owed to a creditor are significant enough to justify the costs of the process, as these fees can only be recouped by the insolvent business if they are still able to afford them.
In order to be eligible to pursue a compulsory winding-up process, you must be able to prove that you are owed at least £750 by your debtor. In order to prove the debt’s existence, you can serve a statutory demand that gives your debtor a 21-day period to either pay the debt or reach an agreement to pay. Failure to respond to this demand proves the debt’s existence and makes the process of applying for a winding-up petition much easier. If all goes accordingly, the courts will approve your order and a liquidator will be appointed to wind up the company.
In the event that another creditor petitions for your debtor’s business to be wound up, you will need to register as a creditor with the insolvency practitioner appointed to handle the proceedings. This won’t guarantee that you’ll be repaid all that you are owed, but you will be permitted to vote in a creditors’ meeting and keep up to date with the status of the process.
Creditor application for an administration order
A creditor may apply for a debtor to be placed into administration by order of the court. The purpose of an administrator would be with a view to achieving a better result for the company’s creditors than would be likely if the company were wound up without first being in administration.
However, it is important to understand your expected return in Administration weighed up against the costs of bringing such an action, so we recommend that you enlist the help of an insolvency practitioner if you are considering this course of action.
Voscap can advise you about the process and what options are available to you, please call 020 7769 6831 or email help@voscap.co.uk to speak to one of our insolvency specialists.
