When a company goes into liquidation, its assets are sold off by the liquidator in an auction to generate funds for the repayment of creditors. However, due to the poor financial state of the company, it’s uncommon for all creditors to receive full repayment.
In the UK, there’s a payment hierarchy for liquidated businesses’ creditors, with secured creditors having priority over unsecured creditors. If a company enters liquidation, it’s likely to permanently cease operations, regardless of whether or not you were aware of its financial difficulties.
If a company that owes you money has gone into liquidation, what steps can you take?
Submitting a Claim to the Liquidator: What You Need to Know
After a company goes into liquidation, the liquidator assumes control of the company and notifies all creditors to submit a claim. A public notice is published in the Gazette, announcing the liquidation process.
In the event that a company which owes you money goes into liquidation, it is necessary to file a claim with the liquidator by stating the amount of your debt, providing supporting documents, and indicating whether you provided goods or services.
As previously stated, there is a payment hierarchy for creditors, which means that the group you belong to influences your chances of receiving payment.
Understanding the Hierarchy of Creditor Groups in Liquidation
After a company goes into liquidation, the costs of liquidation are paid first from the proceeds of the sale of the company’s assets. Then, a payment hierarchy determines the order in which creditors are repaid:
Secured creditors with a fixed charge, such as banks and other large financial institutions, have priority as they can sell the asset over which they hold the fixed charge.
Preferential creditors, which include employees for wage arrears and HMRC for some tax arrears.
Secured creditors with a floating charge, followed by unsecured creditors, which include suppliers, customers, contractors, some HMRC debts, and some employee claims.
Unsecured creditors comprise suppliers, customers, contractors, certain HMRC debts, and certain employee claims.
Associated unsecured creditors, who are placed below unsecured creditors that aren’t connected if they have loaned money to the business.
Each group of creditors must be repaid in full before the liquidator can move on to the next group. Unfortunately, unsecured creditors are often left with little or no dividend from the liquidation process.
If you’re owed money by a liquidated company, InsolvencySupport.co.uk can provide you with more information on what to do next. As liquidation specialists, they offer unbiased and trustworthy advice. Contact one of their team to arrange a free same-day consultation. They have a wide network of offices throughout the UK, so you’re never far from the help and support you need.