Q&As

Can a creditor accept a payment equivalent to the debt owed by an insolvent company from an individual or another company (eg a prepack) who wants to be supplied by the creditor? Would the creditor have to inform the liquidator?

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Published on LexisPSL on 17/09/2015

The following Restructuring & Insolvency Q&A provides comprehensive and up to date legal information covering:

  • Can a creditor accept a payment equivalent to the debt owed by an insolvent company from an individual or another company (eg a prepack) who wants to be supplied by the creditor? Would the creditor have to inform the liquidator?

As a general rule, there is nothing to prevent a creditor imposing whatever preconditions to supply they deem appropriate subject to statutory exceptions (generally in relation to consumer credit, public policy and illegality). Whether or not the preconditions are accepted by a third party (in your question an individual or another company) is a matter of commercial negotiation. See: Guide to dealing with a distressed business—overview and Practice Note: A creditor's guide to dealing with a company in financial difficulty.

In this example, if the third party is a connected person, ie a shareholder or a director of the company in liquidation, and is dependent on the continuation of supply to continue its trade in a new venture, the creditor is more likely to succeed in requiring the new venture to recompense it for the pre

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