It’s not unusual if you are owed money by a company for it to enter some form of insolvency process, but this doesn’t mean that all is lost.
Subject to limitation issues, you could wait and let the insolvency process take its course, submitting details of your claim (known as your proof of debt) and allowing the office holder, such as an administrator or liquidator, to carry out his duties and evaluate your claim.
Legal proceedings may also be pursued against an insolvent company, subject to some restrictions, but it is important to consider whether it would be cost-effective to pursue such a claim, because unless you have a proprietary right or security over the company’s assets, your claim will rank equally with those of other unsecured creditors. In any case, you might recover only a percentage of your claim by way of a dividend, or nothing at all.
Of course, if you have valid security over the company’s assets, it’s far more likely that you’ll be able to recover what you are owed, though as a floating charge holder you would only be entitled to receive the net proceeds from a sale of the assets, once certain other creditors had been paid.
However, there are other circumstances in which you may claim other than merely as an unsecured creditor.
Retention of Title claims
If you have supplied goods to the debtor company under a contract with a valid retention of title clause, you may be able to establish that you still have title to those goods, providing that, amongst other factors, the contract was entered in to before the goods were supplied, there are goods that have not been paid for and they can physically be identified.
Claims against directors
If a director has given a personal guarantee for a company loan, they will incur a personal liability.
Claims may also be made against directors for breaches of duty and antecedent transactions. While many of these may only be brought by an office holder and in some cases only by a liquidator, creditors may pursue claims against directors for transactions defrauding creditors and misfeasance.
However, a court might only make an order that any contribution from the directors be made in favour of the creditors as a whole.
Claims against insurers
If the company had insurance to cover the liability in respect of which the claim is being made, such as for professional negligence, then the Third Party (Rights Against Insurers) Act 2010 provides for claims to be made directly against the insurer.
Pursuing claims against insolvent companies and relevant third parties is a complex process with which there are significant risks and hurdles to be overcome. At Harrison Drury, we make it possible to achieve the best outcomes for creditors of insolvent companies by taking a detailed look at each case and fully understanding our client’s objectives.
For more information, or to discuss any aspect of debt and insolvency call James Robbins on 01772 258321.