When a customer becomes insolvent: what UK suppliers can still do

Atlas Claims InsightsPublished 27 October 2026 · 9 min read

Discovering that a customer has gone into administration or liquidation is one of the worst moments in credit management. The instinct is to stop supplying, chase hard and repossess goods. Some of those steps help, but others are restricted by insolvency law and can backfire. This guide covers the position in England and Wales.

The main insolvency procedures

First steps

• Confirm the facts: check the Gazette and Companies House to identify the procedure, the date and the office-holder.
• Stop and take stock: identify what is owed, which invoices are disputed, what goods are on the customer’s premises and what security you hold.
• Contact the office-holder in writing: notify any retention of title claim immediately and ask for confirmation that the goods will be preserved.
• Do not help yourself: entering premises to remove goods without consent, or issuing proceedings during a moratorium, can expose you to liability.

Retention of title

A retention of title (ROT) clause says that ownership of goods stays with the supplier until they have been paid for. If it was properly incorporated into the contract, the goods do not belong to the insolvent customer and the supplier can claim them back. In practice, ROT claims succeed only if:

• The clause was part of the contract, for example in signed terms or terms clearly accepted before the order, not just printed on the back of an invoice.
• The goods still exist in their original form and can be identified as the supplier’s, for example by serial numbers or batch marks, and have not been mixed into other products.
• The claim is notified quickly, before the goods are sold or used.

“All monies” clauses, which keep title until all debts are paid, are generally effective. Claims over proceeds of sale or over manufactured products are much harder to sustain. In administration, the supplier needs the administrator’s consent or the court’s permission to repossess, but the administrator must deal with the goods properly and will often agree to pay for them or return them.

Continued supply after insolvency

Rules introduced in 2020 generally prevent suppliers of goods and services from using a contractual right to terminate or suspend an existing supply contract, or to do anything else under it, because the customer has entered an insolvency or restructuring procedure, or because of a breach such as non-payment before that date. They also prevent suppliers from making payment of pre-insolvency arrears a condition of continued supply. The rules apply to existing contracts: they do not oblige a supplier to accept new orders where there is no continuing supply contract, and some contracts, such as many financial services, are excluded. Supplies made after the insolvency must be paid for, and there are limited exceptions, for example with the office-holder’s consent or where the court is satisfied that continuing would cause the supplier hardship. Take advice before refusing to supply.

Set-off and proving for the debt

• Insolvency set-off: if you owe the insolvent customer money as well as being owed, mutual debts are set off automatically in a liquidation, and in an administration once the administrator gives notice of an intention to distribute. Only the balance is claimed or paid.
• Proof of debt: submit a proof of debt to the office-holder, with copies of invoices, so that you are included in any dividend and can vote on proposals.
• Priority: secured creditors, insolvency costs and preferential creditors, including certain employee claims and some HMRC debts, rank ahead of ordinary unsecured creditors. A “prescribed part” of floating charge realisations is set aside for unsecured creditors.

Other ways to reduce the loss

• Guarantees: if a director, parent company or bank guaranteed the account, make a demand promptly in accordance with the guarantee’s terms.
• Credit insurance: notify the insurer within the policy deadlines.
• VAT bad debt relief: you can usually reclaim the output VAT you accounted for to HMRC on unpaid invoices once they are more than six months overdue and have been written off in your VAT records. The claim must be made within four years and six months.
• Payments received before the insolvency: an office-holder may challenge payments made to a creditor in the six months before insolvency (two years for connected parties) as a preference, but only if the company was influenced by a desire to put that creditor in a better position. Ordinary payments under commercial pressure are not usually preferences.

Warning signs to act on earlier

Most suppliers lose more than they need to because they keep extending credit to a customer in difficulty. Warning signs include payments slipping later, part payments, round-sum payments on account, changes of bank, new excuses for disputes, late filing of accounts, county court judgments and staff departures. When they appear, reduce credit limits, ask for security or payment in advance, and escalate overdue debts quickly. Our guide to preventing bad debt explains the terms that make recovery easier.

This guide is general information about the law of England and Wales as at October 2026. It is not legal advice and may not cover your situation. Atlas Claims is not a law firm; for advice on your legal rights or on litigation, consult a qualified solicitor.