When a company goes into liquidation, the liquidator arranges for any assets the company holds to be sold at auction. The money generated from this sale is used to repay creditors, but because of the company’s poor financial position it’s rare for all creditors to receive repayment.
A payment hierarchy exists for the creditors of a liquidated business in the UK - secured creditors are at the top and unsecured creditors at the bottom. You may or may not be aware of the company’s serious financial position, but once it enters liquidation it will ultimately close down permanently.
So what should you do if a company has gone into liquidation and owes you money?
When a liquidator is appointed they take over control of the company from directors, and invite all creditors to make a claim. A public notice is also placed in the Gazette advertising the fact that the company is to be liquidated.
So if a company owes you money and they have entered liquidation you’ll need to file a claim with the liquidator, stating the amount you’re owed, whether you provided goods or services, and also supporting documentation.
As we mentioned earlier, there’s a specific hierarchy of creditor groups so the group you’re in determines your likelihood of being paid.
The costs of the liquidation are paid first out of the proceeds of asset sale, followed by:
Each category of creditor must be repaid in full before the liquidator can move on to the next group, unfortunately leaving unsecured creditors at serious risk of receiving no dividend at all from the liquidation process.
If you would like more information on what to do if a liquidated company owes you money, UK Liquidators can help. We’re liquidation specialists and will provide the trustworthy unbiased advice you need. Please call one of the team to arrange a free same-day consultation – we work from a wide network of offices throughout the UK.
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One of the main benefits of trading as a limited company is that directors are given the protection afforded by limited liability.
A Members’ Voluntary Liquidation – or MVL – is a formal liquidation process designed as a way for solvent companies to wind down their operations.
A Creditors’ Voluntary Liquidation – or CVL – is a formal insolvency process for insolvent limited companies.
If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.
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