Short answer: Once a business customer enters administration or compulsory liquidation, you usually cannot sue it or enforce a judgment without permission. Instead, you submit a proof of debt to the administrator or liquidator, with your invoices and statement, and wait for any dividend. Check straight away whether you have a retention of title clause, a personal guarantee or money you owe the company, because each one changes what you can recover.
An email from an insolvency practitioner saying your customer is now in administration or liquidation is one of the worst things a supplier can receive. Chasing harder rarely helps at that point. The law freezes most individual collection action, so that the office-holder can deal with every creditor together. What you do in the first few weeks still matters, though.
This guide is general information for UK businesses, not legal advice. It covers companies in England and Wales. Sources were checked on 28 October 2026: the Insolvency Act 1986 (Schedule B1 paragraph 43 and section 130) and the Insolvency (England and Wales) Rules 2016 (rules 14.1, 14.3, 14.4 and 14.25).
Administration and liquidation compared
| Procedure | What it is for | Can you sue or enforce? |
|---|---|---|
| Administration | An administrator tries to rescue the business, sell it, or get a better result for creditors than an immediate liquidation | No legal process can be started or continued without the administrator's consent or the court's permission (Schedule B1 paragraph 43(6)). |
| Compulsory liquidation | The court orders the company to be wound up, often on a creditor's petition | No action can be started or continued without the court's permission once the order is made or a provisional liquidator is appointed (section 130(2)). |
| Creditors' voluntary liquidation | The directors and members close an insolvent company and a liquidator sells the assets | Individual action rarely makes sense. Claims are dealt with by proof of debt to the liquidator. |
If you already have a county court judgment, the same rules generally stop you enforcing it. Our guides on enforcing a CCJ against a limited company and whether a company can survive a CCJ explain the position before insolvency.
What to do in the first two weeks
- Confirm the procedure. Check the company record on the Companies House register and the notices in The Gazette. Note the office-holder's name, firm and reference.
- Stop supplying on credit. If the administrator wants the business to keep trading, agree in writing who will pay for new supplies before you deliver anything.
- Check your terms for retention of title. If you supplied goods and your terms keep ownership until payment, tell the office-holder at once and ask for the goods to be identified and kept apart. Our retention of title guide explains when this works.
- Look for a personal guarantee. A director's guarantee is a separate claim against that person and is not frozen by the company's insolvency. See personal guarantees on unpaid B2B invoices.
- Work out the balance. List every unpaid invoice, credit note and payment, and anything you owe the company.
How to submit a proof of debt
Rule 14.3 says a creditor who wants to recover a debt must submit a proof to the office-holder. The office-holder will usually send a form or a link to an online portal. Rule 14.4 says the proof must include:
- your name and address, and your company details if you are a company;
- the total amount claimed, including VAT, at the date of the insolvency, less any payments since then;
- whether the claim includes interest that has not been added to the debt;
- how and when the debt arose;
- details of any security you hold and its value;
- details of any retention of title over the goods;
- the documents that support the claim, such as invoices, purchase orders, delivery notes and a statement of account.
The proof must be dated and authenticated. The office-holder can ask for more evidence. The same papers you would gather before instructing collection apply here, so the proof of debt checklist is a good starting point. Where your terms or the law gave you statutory interest or fixed late-payment compensation up to the insolvency date, show it separately.
For a small debt of £1,000 or less (rule 14.1), rule 14.3(3) says you can be treated as having proved for dividend purposes if the office-holder sends you the required notice and you do not dispute the figure. Check that figure carefully.
Set-off if you also owe the company
In a liquidation, rule 14.25 says the dealings between you and the company must be netted off. If they owe you £12,000 and you owe them £3,000 for something they supplied, you prove for £9,000. If the balance is in their favour, you must pay it to the liquidator. Be open about it on the proof.
What you can realistically expect
Unsecured trade suppliers rank behind the costs of the insolvency and creditors with priority, such as secured lenders. Many receive a small dividend, sometimes years later, and some receive nothing. The office-holder's progress reports will say whether a dividend is expected. Two things can soften the loss:
- VAT bad debt relief. If you have paid the VAT on the invoice and the conditions are met, you may be able to reclaim it. See VAT bad debt relief on unpaid invoices.
- Credit insurance. If you hold trade credit insurance, tell your insurer quickly. Policies often have strict notice deadlines.
Spotting it earlier next time
Most insolvencies give warning signs first: slower payment, part payments, broken promises and missed filings. Our guide to insolvency warning signs and the guide on objecting to a strike-off help you act while a solvent customer can still be chased.
Frequently asked questions
Can I still sue a customer that has gone into administration? Not without permission. Paragraph 43 of Schedule B1 to the Insolvency Act 1986 says no legal process can be started or continued against a company in administration without the administrator's consent or the court's permission. In practice, you claim through the administrator instead.
Can I take a company to court once it is in liquidation? In a compulsory liquidation, section 130(2) of the Insolvency Act 1986 says no action can be started or continued against the company without the court's permission once a winding-up order is made or a provisional liquidator is appointed. The normal route is to submit a proof of debt to the liquidator.
What is a proof of debt? It is your formal claim to the administrator or liquidator. Rule 14.3 of the Insolvency (England and Wales) Rules 2016 says a creditor who wants to recover a debt must submit one. Rule 14.4 lists what it must contain, including the total claimed with VAT, how and when the debt arose, any security, any retention of title and the documents that support it.
Do I have to submit a proof for a small debt? For debts of £1,000 or less (a small debt under rule 14.1), rule 14.3 says you can be treated as having proved for dividend purposes if the office-holder sends you a notice and you do not say the figure is wrong. It is still sensible to check the figure and correct it if needed.
What if I also owe the company money? In a liquidation, rule 14.25 requires an account of mutual dealings. What each side owes the other is set off, and only the balance due to you can be claimed. If the balance is in the company's favour, you must pay it to the liquidator.
Will I get my money back? Often only part of it, and sometimes none. Unsecured trade creditors are paid from what is left after the costs of the insolvency and creditors ranked ahead of them. The administrator's or liquidator's reports to creditors will give an estimate.
Can I claim VAT back on the unpaid invoice? Possibly, through VAT bad debt relief, if you have accounted for the VAT and the conditions are met, including that the debt is at least six months overdue and written off in your accounts. See our guide to VAT bad debt relief and check HMRC guidance or an accountant for your case.
Can your partner recover a debt from a company in administration? We are an introducer, not solicitors, insolvency practitioners or an FCA-authorised firm. Once a company is in a formal insolvency, recovery usually runs through the office-holder, so a collection agency may not be the right route. Where a debt is owed by a solvent Ltd, LLP or PLC and our partner accepts it, the fee is 15% of what is recovered, payable only when you have been paid. Recovery is not guaranteed.
If a solvent Ltd, LLP or PLC owes you an undisputed invoice and is not in administration or liquidation, upload the invoice via business debt collection or read how no collection, no fee works. The fee is 15% of what is recovered, payable only when you have been paid. Recovery is not guaranteed.