Commercial Law Services
Creditors’ Rights On Insolvency
If a creditor is owed money and pursues a claim against a company which it does not have the means to pay, that may result in a company entering an insolvency process.
This may happen because the creditor pursues the debt using a winding up petition, or the company may seek to enter into an arrangement with its creditors, such as a voluntary arrangement, or decide that it needs to appoint an administrator.
Whilst all of these are different processes and the outcome for the company will be different in each case, generally it is true that once a company enters into any sort of insolvency process, that the creditor's chances of being paid are substantially reduced.
Very often a creditor is prevented from pursuing his claim in isolation and simply becomes one of a number of unsecured creditors who will have to await the outcome of the insolvency process to see what prospect they have of being paid.
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