A UK company that goes into liquidation is being wound up: the liquidator collects in the assets, settles claims in the statutory order, and distributes whatever is left. As an unsecured trade creditor, you sit second from the back of that queue. The recovery for unsecured creditors in a UK liquidation is usually between zero and three pence in the pound. The right immediate action is to identify the liquidator, submit a Proof of Debt form to register your claim, and check the three protections most creditors miss before writing the debt off.
Below, the practical steps in order: confirm the liquidation, find the liquidator, register your claim, check retention of title and set-off, understand where you rank, and decide what to do about VAT.
You may have heard about the liquidation in any number of ways: a phone call to the company that goes unanswered, a letter from a solicitor, an email from a credit-control agency, or a notice on a website. Before you do anything else, confirm.
Search the company on Companies House at find-and-update.company-information.service.gov.uk. The filing history will show:
The liquidator's name, firm, and contact details are on the appointment document. The liquidator is a licensed insolvency practitioner regulated by one of the recognised professional bodies (ICAEW, ICAS, IPA, or the Insolvency Service in compulsory cases handled by an Official Receiver). All formal correspondence to the company from this point goes to the liquidator at their firm's address, not to the company's old trading address.
The Proof of Debt is the formal claim form. Until you submit one, you are not on the liquidator's creditor list and you cannot receive a dividend, vote in a creditor meeting, or be heard in the liquidation. The Insolvency (England and Wales) Rules 2016 govern the form and process in rules 14.3 and 14.4; the equivalent in Scotland and Northern Ireland are similar in substance.
The form asks for:
There is no fee. The liquidator's office will usually provide a template or accept the form on its own letterhead. Many firms now accept submission by email with PDF attachments. Send it to the liquidator's named contact at their firm's address.
The liquidator reviews the proof and either admits it in full, admits it in part (reducing the claim with reasons), rejects it (with a right of appeal to the court within 21 days of notice of rejection), or requests further evidence. The admitted amount is the amount on which any dividend is calculated.
Before you treat the debt as a total loss and reach for the calculator on bad debt relief, run three checks. Each can change the outcome materially.
If you supply physical goods, check your terms of sale. A retention of title clause states that ownership of goods does not pass to the customer until the customer has paid for them in full. If your clause is properly drafted and was properly incorporated into the contract (typically on the customer's order form or in agreed standing terms, not first introduced on the invoice), and if the goods are still in the customer's possession, identifiable, and unmixed with anything else at the date of liquidation, you can write to the liquidator asserting your retention of title and ask for the goods back. The liquidator must, on satisfactory evidence, allow you to recover them.
The seminal authority is Aluminium Industrie Vaassen BV v Romalpa Aluminium Ltd [1976] 1 WLR 676, hence the everyday name "Romalpa clause". RoT fails where the goods have been processed, mixed, or resold before liquidation. It does not help service providers.
If the failed company also owed you a debt and you owed them a debt going the other way (perhaps you sold them goods and they sold you services), insolvency set-off under rule 14.25 of the Insolvency Rules 2016 applies automatically. The mutual debts are netted off and you are a creditor for, or a debtor of, the balance. Set-off is mandatory in liquidation, not optional: you cannot opt out, and the liquidator cannot opt out either. Tell the liquidator about both legs of the dealings when you submit your proof.
Did a director of the failed company sign a personal guarantee for the debt at some point: on the original account application, on a credit limit increase, on a rent guarantee, on a director's loan account? Personal guarantees survive the company's liquidation. The guarantor is personally liable to you, separately from any claim against the company. Pursuing a guarantee is a normal civil debt-recovery action against the individual, not a matter for the liquidator.
These three checks are not mutually exclusive. A goods supplier with retention of title, a small set-off, and a director's guarantee can recover the goods, net the set-off, and pursue the director, independently of and in parallel with whatever the liquidator can pay on the residual unsecured claim.
The order of payment is set out in section 175 of the Insolvency Act 1986 and rule 14.12 of the Insolvency Rules 2016. From the top:
A trade creditor's realistic expectation: the assets are used up before they reach rank 7. When a dividend does reach unsecured creditors, the pence-in-the-pound figure tends to be small. The Statement of Affairs filed by the liquidator (or initially by the directors in a CVL) gives the first numerical view of likely recovery; see our Statement of Affairs explainer for how to read one.
When you raised your invoice to the failing company, you accounted for output VAT to HMRC. If the invoice is now unpaid, HMRC's bad debt relief scheme lets you reclaim that VAT, independently of whatever you eventually recover from the liquidation.
The conditions, set out in section 36 of the VAT Act 1994 and Regulation 165A of the VAT Regulations 1995:
To claim, add the VAT to box 4 of your next VAT return (the same box where you reclaim input VAT). Keep a record of the claim (the invoice copy, the date it should have been paid, the date you wrote it off, and the VAT amount) for six years, in case HMRC asks. If you later receive a dividend from the liquidator, you have to repay the equivalent VAT in box 1 of the next return. The relief does not depend on whether the customer is in liquidation, but a customer in liquidation is the cleanest case for writing the debt off.
By the time a customer is in liquidation, the unsecured creditor's position is largely set. The leverage is earlier: when a winding-up petition is advertised, when a Notice of Intention to Appoint Administrators is filed, when accounts are late and new charges are landing.
Confirmed is free: add up to five customers, and you get an email the day one of them goes into administration. Protect adds liquidation, strike-off, and the earlier warning signs, across an unlimited number of companies.