Insolvent company owes me £10k - will I see any of it

[rob1970]

Hi there,

A company that owes me around £10,000 has just gone insolvent and is having a meeting of creditors. I also have to submit the unpaid invoices.

My question is, is there much chance of getting any of the money involved, and will it help if I seek legal advice or legal representation?

Thank you for your help.

Rob

 

[Lisa Thomas]

Hi Rob

Is it a S98 meeting they have called to place the Company into Creditors Voluntary Liquidation?

There is no point spending any money on representation, it will not affect the assets realisations and dividend prospects.

You could vote for a different IP to become Liquidator and replace the Directors choice of Liquidator depending on whether you have sufficient majority.

You have the ability to physically attend the meeting and ask the Directors and Liquidators questions at the meeting but all the financial information will be contained in a pack of information that will be sent to you within 28 days of the meeting anyway.

 

[rob1970]

Hi Lisa,

Thank you very much for your reply.

Yes, you're right, it's:

Meeting of Creditors Liquidation Notices - Section 98 of the Insolvency Act 1986

Do you know the average % of credit returned after one of these events, or is it most likely to be a case of all money lost?

Thank you for your help.

Rob

 

[Lisa Thomas]

Hi Rob

Every case is unique, it depends on what assets, if any, there are to recover (including any claims brought against Directors) together with what the costs are and level of creditors there are, whether there is a debenture holder, the level of preferential creditors and then the unsecured creditor level.

I presume your claim will be an unsecured creditor?

The Statement of Affairs form will give details of the anticipated assets. This will be presented at the meeting (if you attend) and sent to you afterwards.

I suggest you ring the IP firm and ask them for more info.

You can also look at the last set of accounts filed for the Company on Companies House but these are usually quite out of date and don't always reflect the actual position.

 

[Lawyer James]

It really just depends on the level of assets of the company and the effectiveness of the Liquidator(s) appointed.

Sometimes unsecured creditors get a decent recovery; very often they get nothing.

 

[Nochexman]

Hi Rob, expect to receive nothing and then you might be pleasantly surprised.

 

[Paul Kelly ICHYB]

Sadly, Nochexman's approach is probably right!

Did you supply goods or services? If goods, as per your T&C's (I hope), can you reclaim the goods?

 

[Overmyhead]

What were the circumstances around the debt - how long have they been a customer, have they always paid on time, what did you supply?
Is this a genuine insolvency or are the owners/directors planning on shutting down the old company and starting again afresh? Have they got any skeletons in the closet in terms of directors loans accounts, dubious transactions from old co to new co?
Sorry for all the questions but what I'm driving at is can you afford to simply 'write off' 10k? I suspect for most of us the answer would be no so if it were me I would be digging for as much information as I could possibly find about the company in order to find a way to mitigate my loss.
Perhaps and it's a very small chance you can use the information you have to exert some pressure on the company owners/directors to pay at least some of the money owed to avoid difficult questions with the liquidator or other debtors?
Notwithstanding all of the above it is highly unlikely you will end up with very little back so perhaps better to focus on better strategies for managing debtors and collecting payments?

 

[Lisa Thomas]

Once the Company is in Liquidation the only party that can bring claims against the Directors are the Liquidators or any creditor party to fraud.

Any such information from creditors should be passed to the Liquidators to help them with the investigations and any potential recovery work.

Personally I cant see any reason why a Director of a Company would ever pay a creditor from personal funds unless they have given a personal guarantee or wish to retain a good relationship with that particular creditor (i.e. if they are carrying on with a Phoenix Newco and need that particular supplier).

 

[Lawyer James]

Obviously it is worth ensuring that there is no insurance cover in respect of the debt.

If you think the directors are hiding assets, you may want to get an Insolvency Practitioner appointed as Liquidator who you know will carry out a proper investigation rather than someone the directors have got on board.

 

[Overmyhead]

Once the Company is in Liquidation the only party that can bring claims against the Directors are the Liquidators or any creditor party to fraud.

Any such information from creditors should be passed to the Liquidators to help them with the investigations and any potential recovery work.

Personally I cant see any reason why a Director of a Company would ever pay a creditor from personal funds unless they have given a personal guarantee or wish to retain a good relationship with that particular creditor (i.e. if they are carrying on with a Phoenix Newco and need that particular supplier).

To the letter of the law you are correct as always Lisa however in my experience there are a number of circumstances in which Directors can be 'pursuaded' to offer a payment in full and final settlement to avoid potentially unwelcome attention from other creditors/HMRC and other bodies hence my earlier post about the full circumstances.

 

[Lisa Thomas]

I see.

I would like to think that whatever misconduct it was that Directors wanted creditors to keep quiet about would come out in the wash of the investigation regardless.

 

[Graham Tyers]

In my experience - nope, you'll get nothing. They almost always owe more to the Crown than there will be in the valueless assets that haven't already been moved into the phoenix company.

The owners will be back on the phone asking for credit again before the week's out.

 

[Overmyhead]

I see.

I would like to think that whatever misconduct it was that Directors wanted creditors to keep quiet about would come out in the wash of the investigation regardless.

But if the company/directors appoint a 'friendly' liquidator isn't that a little like expecting turkeys to vote for Christmas? Please don't think I'm disparaging liquidators in general or their role in insolvency but the original poster could follow the 'official' process and get nothing or be a little more thorough and maybe get something? As I said in my original reply I suspect most of us couldn't afford to just 'lose' 10k but I guess that's a decision for the OP

 

[Lisa Thomas]

Not at all - Directors initially appoint us as Liquidators and then we represent the creditors and immediately start investigating the Directors conduct. In most cases the only relationship we have had up to that point with the Directors is helping to put the Company into Liquidation.

 

[Lisa Thomas]

I did originally suggest to the OP that they could vote for their own choice of Liquidator - even if they don't have sufficient to sway it, it might result in a joint appointment.

 

[Overmyhead]

Not at all - Directors initially appoint us as Liquidators and then we represent the creditors and immediately start investigating the Directors conduct. In most cases the only relationship we have had up to that point with the Directors is helping to put the Company into Liquidation.

Apologies if I have misunderstood - the Directors appoint the liquidator and if I've understood the process then guarantee their fees? At that point the liquidators represent the creditors of the company and investigating the conduct of the Directors - surely there is a conflict of interest given that effectively the Directors/Company are paying the bill for the liquidator?

I can't quite get my head around that....what powers do the liquidators have in the event of poor conduct by the Directors?

 

[Lisa Thomas]

Actually the Shareholders formally appoint the Liquidators, although the original instruction comes from Directors and usually they are both one and the same.

It's very rare (in my experience) for a Director to pay the Liquidators fees - these are usually approved by creditors and paid from the assets realisations in the Liquidation.

The Liquidators have all the powers under the Insolvency Act to pursue Directors for misconduct such as illegal preferences, transactions at an undervalue, transactions defrauding creditors, wrongful trading, fraudulent trading and the all encompassing 'misfeasance'.

In addition a report is submitted to the Insolvency Service regarding any misconduct who can disqualify, fine or imprison (in extreme cases) Directors in addition to any action the Liquidators might take.