A creditor’s guide to dealing with a company in financial difficulty

The following Restructuring & Insolvency practice note provides comprehensive and up to date legal information covering:

  • A creditor’s guide to dealing with a company in financial difficulty
  • Order of priority of payment
  • Creditor's position in formal insolvency processes
  • Compulsory liquidation/creditors voluntary liquidation
  • Company Voluntary Arrangements (CVAs)
  • Administrative Receivership
  • Administration
  • Taking preventative measures—top tips

A creditor’s guide to dealing with a company in financial difficulty

STOP PRESS: The Corporate Insolvency and Governance Act (CIGA 2020) is in force from 26 June 2020. The government has legislated to temporarily prevent winding up proceedings being taken on the basis of unsatisfied statutory demands and to temporarily stop winding-up proceedings where coronavirus has had a financial effect on the company which has caused the grounds for the proceedings (see Practice Note: Corporate Insolvency and Governance Act 2020—temporary changes to corporate statutory demands and winding-up petitions).

This note aims to:

  1. provide practical guidance to creditors owed money by a distressed/insolvent company

  2. explain the position of creditors in most types of corporate insolvency situations

  3. provide advice on what a creditor can do to maximise their position if a company enters into formal insolvency proceedings—both before and during.

This guide does not cover:

  1. individual bankruptcies. See Practice Note: Creditors' bankruptcy petitions—grounds and documents required for presentation

  2. partnerships. See General partnerships and insolvency—overview

  3. the detail surrounding corporate insolvency processes

  4. debt recovery options against live companies

The fact that a company is insolvent and so unable to pay its debts as and when they fall due (as defined by the IA 1986, s 123) means that there will only ever be a limited pot of money available for all creditors, and it’s the unsecured creditors who inevitably end up

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