Your Rights When a Company Goes Into Administration

What happens when a company goes into administration

When a company enters administration, an insolvency practitioner is appointed to take charge. Their role is to either rescue the business as a going concern or, if that is not possible, to sell off assets and repay creditors in a set order.

The order of priority is fixed by law. Fixed charge holders are paid first, followed by the insolvency practitioner's fees and expenses. Next come preferential creditors, which include certain employee claims up to a statutory cap and some HMRC debts under the Crown preference rules reintroduced in December 2020. Floating charge holders are paid after this, with unsecured creditors last in line.

Customers owed money for undelivered orders, gift card balances, or deposits for work that never happened rank as unsecured creditors. This puts them at the back of a long queue. Unsecured creditors often receive only a fraction of what they are owed, and in some administrations they receive nothing at all.

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Paying by credit card: Section 75 protection

If you paid for goods or services costing between £100 and £30,000 using a credit card, you may be able to claim a refund from your card provider under Section 75 of the Consumer Credit Act 1974. This makes the credit card company jointly liable with the retailer for any breach of contract or misrepresentation.

The £100 threshold applies to the price of the item itself, not your payment amount. So if you bought something for £150 and paid £50 on your credit card and the rest in cash, you can still make a Section 75 claim for the full amount.

Contact your credit card provider to start a claim. You will usually need to provide proof of purchase and explain what went wrong. While there is no statutory deadline, claims must generally be made within six years of the breach of contract in England, Wales, and Northern Ireland, or five years in Scotland.

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Other ways to recover your money

If you paid by debit card, or by credit card for something under £100, you may be able to use chargeback. This is not a legal right but a voluntary scheme run by card networks such as Visa and Mastercard. Your bank can attempt to recover the payment from the retailer's bank, though success depends on the card issuer's discretion. Time limits apply, often 120 days from when you became aware of the problem, so act quickly.

Other options depend on your circumstances. PayPal purchases may be covered by PayPal's Buyer Protection scheme. Gift cards issued by third party providers, rather than the failed company itself, may still be valid. Goods bought through finance agreements may be recoverable from the finance company. Travel bookings made through ATOL protected agents have separate protections for package holidays. The Financial Conduct Authority regulates many payment and finance providers, and their guidance may help if you encounter difficulties with a claim.

Check GOV.UK for current guidance on insolvency and your rights as a creditor.

Registering as a creditor

Even if your chances of recovery are slim, it is worth registering your claim with the administrator. Details of the administration and how to submit a claim are usually published on the insolvency practitioner's website or through Companies House.

You will need to provide evidence of what you are owed. Keep copies of receipts, order confirmations, and any correspondence with the company. The administrator will write to creditors if there is a distribution, though this process can take months or years. Registering ensures you receive your share of whatever funds become available.

The Next Step

Now that you have read through the advice above, you might want to put it into practice. Our Consumer Rights Act 2015 Checker lets you check your rights under the Consumer Rights Act 2015. Covers goods, services and digital content. Takes 2 minutes. Try it now →