About this website
A step-by-step guide for businesses who have lost money in an insolvency
***Please note that the content of these pages are in the process of being updated to reflect the changes introduced by the Insolvency (England and Wales) Rules 2016.***
Insolvency can be a difficult and stressful situation for everyone involved – whether it’s the insolvent company or individual, the ‘debtor’, or the individuals and companies who face the possibility of having their debts go unpaid, the ‘creditors’.
This guide to insolvency is designed to help creditors negotiate what can often be a complicated process which can sometimes seem time-consuming or confusing. The guide has been written for the sole traders or small companies who are unlikely to be exposed to insolvent debtors on a regular basis, usually known in the insolvency process as ‘unsecured creditors’.
The guide explains the terms you might come across and the insolvency procedures you are likely to be involved in. Also included is advice on how to increase the chances of getting your money back, how to see misbehaving directors or debtors brought to justice, and how to agree a fair fee with an insolvency practitioner for the work they will be doing to help you.
Where we can, we’ve tried to avoid technical language, but sometimes this isn’t possible:
The nature of insolvency means it isn’t always possible to get all the money you are owed back – sometimes there is no money at all left in an insolvent business that can be used to repay creditors.
However, the more you get involved, the better the chances you have of seeing a positive outcome at the end of an insolvency procedure.
Are you an unsecured creditor?
Unsecured creditors are businesses or individuals who are owed money by insolvent companies or individuals but who do not hold a ‘security’ in respect of it e.g. a mortgage. In Scotland, unsecured creditors can be referred to as 'ordinary creditors'.
This can include trade suppliers, employees, and government (taxes are an unsecured debt). Unsecured creditors generally make up the bulk of creditors in an insolvency (in number rather than the size of debts).
The nature of insolvency means that creditors will not always receive back all that they are owed. The debts owed to unsecured creditors are also less likely to be repaid than those owed to secured creditors, like banks or other lenders such as invoice factoring companies or asset based lenders.
Despite this, it is important all creditors engage in the insolvency process: active participation by creditors can increase the chances of debts being repaid or ‘rogue’ directors or debtors being brought to justice.
A few facts about UK insolvency and restructuring
In 2016 there were just over 100,000 new insolvency cases across the UK – so if you are owed unpaid debts you’re not alone. The World Bank ranks our insolvency and restructuring framework as one of the best in the world, returning more money to creditors, faster and more cheaply, than the insolvency frameworks in the US, France and Germany.
You may also be interested to know that, in 2013-14, our profession:
• Rescued 41% of the insolvent businesses with which it worked;
• Helped save 230,000 jobs;
• Advised 135,000 people about their finances;
• Helped 60,000 people through an insolvency procedure;
• And started work on cases that will help people repay £5bn of personal debt to creditors by 2018-19.
The UK’s insolvency and restructuring profession includes around 1,500 licensed insolvency practitioners who take insolvency appointments – you can find a nearby insolvency practitioner here.
R3 is the trade association for the UK’s insolvency, restructuring, advisory, and turnaround professionals. We represent insolvency practitioners, lawyers, turnaround and restructuring experts, students, and others in the profession.
Our members work in firms of all sizes, from the global legal and accountancy firms through to smaller, local practices.
The insolvency and restructuring profession is a vital part of the UK economy. The profession rescues businesses and jobs, creates the confidence to trade and lend by returning money fairly to creditors after insolvencies, investigates fraud, and helps indebted individuals get back to their own two feet.
The UK is an international centre for insolvency and restructuring work and our insolvency and restructuring framework is rated as one of the best in the world by the World Bank. R3 supports the profession in making sure that this remains the case.
This website is part of our objective to promote best practice in the UK insolvency regime – making sure that the insolvency process is fair and transparent for all those involved.
Each step of the insolvency process is summarised in a checklist to help you make sure you’ve done everything that you need to. For insolvency procedures in England and Wales please see here. For procedures in Scotland please see here.