Client Co. in voluntary liquidation

[Contreras]

Hi, I'm posting this having done only minimal research in the hope that if I need to react fast with certain actions then someone can advise me before it's too late. I intend to research this further today... in the meantime any pointers would be appreciated.

Received a letter from a firm of insolvency practitioners that an old client, who still owes my Co. part payment for some work invoiced, has "considered its financial position and resolved that the Company should be put into voluntary liquidation."

The insolvency company "has been asked to assist in the convening of the meeting of creditors and the preparation of a report and Statement of Affairs, ... The purpose of the meeting is to appoint a liquidator of the Company, and if the creditors wish, a Liquidation Committee. Resolutions at this meeting may include ... specifying how the liquidator is paid and ... to approve the costs ..." etc. Along with this is a form to complete with proof of debt which needs to be completed in order to vote at the meeting, and a proxy voting form.

With travel, attending the meeting in person would mean losing a day out of my current contract. To put the this into perspective the debt equates to just under a weeks worth of invoice on my current contract. I had already mentally written off the amount some time ago as a lesson learned in business management and credit control, and I would view anything received from this point as a bonus.

The client is (or was) a small consultancy with 1-2 employees and seems to have been forced into this position by a couple of projects going bad (itself a useful lesson for me to watch it happen) meaning that all revenue streams have disappeared leaving the costs incurred chasing those projects as bad debt.

This is where the questions start - What do I need to know about the liquidation process? How actively should I be in pursuing this? Will it make a material difference or is it likely to be a lost cause? Any tactics that I should employ, or be aware of?

[Gonzo]

If I were you I would write the money off and not lose any billing days chasing it.

If the company has some assets then it is possible that the insolvency company can raise some cash out of them.

In the case of a small consultancy I think this is very unlikely and the chances are that after the insolvency company has deducted its fees there will be nothing remaining for the creditors.

In a previous life I used to see the results of insolvencies passing across my desk and the only people that ever got any money out of them were the insolvency practitioners. There was never any money left over for the creditors.

[geoff from contracta IOM]

It gives me no pleasure to tell you this but unfortunately it is usually the case that whatever is left in assets and monies owed to the company will be almost exactly equal to what the IP invoices for their time as Gonzo has already said. Best advice is take the days billing on your current contract and put it behind you.

[JoJoGabor]

Yeap, same happened to me when I was working for a small consultancy as a permie. I was owed about £1500 in expenses, applied to the administrators but got zip. The bank account was empty

[minstrel]

It's highly likely you will end up with nothing.

Don't bother going to the meeting, just fill in the forms and send copies of your invoices.

The liquidator should send you a statement after the meeting showing all the creditors and debtors for the company and an estimated return for creditors. This is expressed as pence in the pound e.g. 10p in the pound would mean if you are owed £1,000 you might end up with £100.

It happened to me once. Took 18 months for the process to complete and ended up with about 14p in the pound.

Was your client an agency and are you a member of the PCG? If so you may be able to claim around £7k on the agency insurance.

[oversteer]

Don't forget to get your accountant to write off the bad debt, you will get the tax back at least.

[Contreras]

Thanks all for the advice. Yep, definitely not getting my hopes up. I accepted the risk when I took on the work knowing full well they were in trouble and I was actually just trying to help dig them out of a mess. Had mentally written it off already but was never certain of it so the debt stayed on the books, so in a sense this is closure.

I presume there is no point in supplying proxy voting instructions for the appointment of a liquidator, or any other resolutions? The insolvency practitioner probably has that one in the bag already. I note that their cheapest charge out rate is that for a lowly Admin Assistant at £100 per hour.

The form for declaring Proof of Debt includes for "uncapitalised interest at the date the company went into liquidation". I never issued the client any statement or demands for statutory interest. Can I declare that to the liquidator as interest owed even though the company hasn't received a formal notice? Might as well, I reckon, unless there's a good reason not to.

minstrel, yep it was a direct contract with no agency involvement, but thanks for relating your experience all the same.