Where are employees in the list of creditors of a firm that’s bankrupt or in administration?
I posted to the branch blog https://www.gmblcgx58.org.uk/if-my-employer-goes-bust/ which briefly says that,
The order in which an insolvent company’s assets is distributed is as follows, fixed charge lenders i.e. mortgage loans, liquidators expenses and fees, then preferred creditors (such as employees and HMRC).
This is dated 2022, the legislation has not changed and so I looked it up again and found the following commentaries from some law firms.
The law is the Insolvency Act 1986.
- https://www.bridgenewland.co.uk/liquidation-who-gets-paid-first/
- https://www.citizensadvice.org.uk/work/pay/getting-paid-if-your-employer-goes-out-of-business-or-disappears/
- https://www.begbies-traynorgroup.com/articles/insolvency/who-gets-paid-first-when-a-company-goes-into-liquidation
The language in these is quite obscure, but employees are unsecured creditors.
- UK Company insolvency FAQs by the House of Commons Library 2026
- I did a google search, “what is the UK law governing the order of claim against a failed company” and got an AI perspectives reply, If accurate, it’s very clear.
- I am also curious about how Directors might avoid the circumstances of a failure by starting again. This is called “Abusive Phoenixing”, and the key enforcement body is the Insolvency service which runs a “Redundancy Payments Service“.
- An article, insolvency service targets phoenix directors: what the new crackdown means for fraud victims from a law company called VWV.