Where you actually stand
A creditor owed money by an insolvent company usually knows in the abstract that it will not be paid in full. What is less well understood is how far down the order it sits, and that the order is fixed by statute rather than by who shouted first.
Broadly, in an English corporate insolvency, money is applied in this order.
- 01First
Fixed charge holders
Lenders with security over specific assets, paid from the proceeds of those assets. Typically a bank with a charge over property.
- 02Second
The costs of the insolvency itself
The office holder's remuneration and the expenses of the process. These come out before any distribution to creditors.
- 03Third
Preferential creditors
Certain employee claims, and specified tax debts owed to HMRC in respect of amounts collected from third parties.
- 04Last
Floating charge holders, then unsecured creditors
Subject to the prescribed part set aside for unsecured creditors. This is where an ordinary trade supplier sits, and it is frequently where the money runs out.
The payment you might have to give back
This is the part creditors least expect. Where a company pays one creditor shortly before entering an insolvency process, and the effect is to put that creditor in a better position than it would otherwise have been in, the payment can be challenged and unwound. Transactions at an undervalue can be attacked on a similar basis.
The practical consequence is that receiving payment from a company you know to be in difficulty is not automatically the end of the matter, particularly where you pressed for it and the company obliged you ahead of others. It is worth advice before assuming the money is safe.
Restructuring, before it gets that far
Options while there is still time
- A standstill, giving the business room to trade through
- Rescheduled payment terms with security attached
- Converting debt to equity where the business has a future
- A formal arrangement binding dissenting creditors
- A solvent sale of the business as a going concern
What is left once it is formal
- Proving in the insolvency and waiting
- A dividend that is usually a small number of pence
- No influence over how the process is run
- Costs already spent on enforcement, unrecovered
- Possible exposure to a clawback claim
Insolvency across the two countries
Before Brexit, an insolvency opened in one EU member state was recognised across the others more or less automatically, which mattered a great deal for a company trading in one country and holding assets in another.
That framework no longer covers the UK. A UK insolvency process is not automatically recognised in Lithuania or elsewhere in the EU, and an EU process is not automatically recognised here. Recognition has become a separate question with its own answer in each direction, and it needs to be dealt with deliberately rather than assumed. For a creditor, this is exactly the situation where instructing two unconnected firms produces the worst outcome.
What I handle
- Creditor advice on where you stand and whether pursuing the debt is worth the cost.
- Statutory demands and winding-up petitions, including whether one is the right instrument at all.
- Proving in an insolvency and dealing with the office holder.
- Defending clawback claims where a payment received is being challenged.
- Restructuring negotiations, standstills and secured repayment arrangements.
- Cross-border recognition questions between the UK and Lithuania.
- Director advice on duties as a company approaches insolvency, where the duty owed shifts toward creditors.
What it costs
Statutory demands are fixed-fee and published: £250 against an individual, £350 against a company, including VAT. Petitions, restructuring negotiations and contested clawback claims are quoted with a written estimate before anything starts. The full published scale is on the fees page, and the mechanics of a statutory demand are set out in the guide to statutory demands.
Common questions
What do unsecured creditors usually recover in an insolvency?
Often very little, and sometimes nothing. Secured lenders, the costs of the process and preferential claims are paid first, and unsecured creditors share what remains. That is why acting before a formal process begins is worth more than acting decisively after one has.
Should I petition to wind up a company that owes me money?
Only if the company can pay and is choosing not to. Against a genuinely insolvent company a petition turns you into an unsecured claimant in a process you do not control, and the petition costs are rarely recovered. Where the debt is disputed it is the wrong instrument entirely.
Can a payment I received be taken back?
It can be challenged. Where a company pays one creditor shortly before entering an insolvency process and the effect is to put that creditor in a better position than it would otherwise have occupied, the payment can be attacked and unwound. If you have been paid by a business you knew to be struggling, take advice before treating the money as yours.
Is a UK insolvency recognised in Lithuania after Brexit?
Not automatically. The EU framework that provided near-automatic recognition between member states no longer covers the UK, in either direction. Recognition is now a separate question requiring its own steps, and it should be planned for rather than assumed.
What are a director's duties when a company is in difficulty?
As insolvency becomes likely the focus of a director's duty shifts toward the interests of creditors rather than shareholders. Continuing to trade and incur credit past the point where there was no reasonable prospect of avoiding insolvency carries personal risk, so this is a point at which advice is genuinely worth taking.
Is restructuring only for large companies?
No. A standstill agreement, rescheduled terms with security attached, or a negotiated partial payment are available to businesses of any size and are frequently better for both sides than a formal process. They just require both parties to engage before matters harden.
This page states the law of England & Wales and Lithuania as at 18 August 2026. It is general information, not advice on your matter, and reading it does not create a solicitor-client relationship.