What happens if your biggest supplier goes into liquidation?
Most businesses rely on other businesses in some way in order to operate. Whether you source raw materials, parts, finished products, transport, delivery services, energy, or any other product or service, a supplier going bust can cause your business big problems.
The most common issues for businesses to be concerned about when a supplier goes into liquidation tend to surround the supply of the goods and/or services themselves, payments for goods/services – or often, both. To keep things simple, we’ve broken down the most common questions you’ll need the answers to if one of your suppliers has gone into liquidation (also known as ‘winding up’).
What do we do if our business owes the supplier money?
Your business might have outstanding debts that are owed to the supplier. This is very normal as your payment terms could be 30, 60 or 90 days, or perhaps more.
If you owe your supplier money, then you should await further instruction from the liquidator. Attempts to pay any company (whether the original company or any potential new owner) may result in you paying twice.
What do we do if our business has paid for goods or services that we have not received?
If you have already made payment in advance to the supplier and have not received the product or service that you have paid for, then you will no doubt want to take the appropriate steps to be refunded.
As soon as you find yourself in this situation, you should write to the liquidator enclosing proof such as a receipt or credit card voucher and keep a copy of your letter.
However, it is worth noting that you will only get your deposit back if the company has enough assets to pay you, which will be unlikely. Typically, creditors will only receive a proportion of the funds they are due, shared amongst the body of creditors, unless security is held such as a floating charge.
If you made payment via credit card and the dispute is valued at between £100 – £30,000, then the credit company may be equally liable and so this could be another avenue worth exploring, depending on your circumstances.
We’re waiting for goods that we desperately need – is there anything we can do to get hold of them?
If there is any trace that goods you ordered have been allocated to or reserved for your business and have been paid for, then you are entitled to have them and should contact the liquidator as soon as you can to prevent them from being sold.
If there is no record that any goods have been earmarked for your business then you may be able to negotiate with the administrator or liquidator to sell you the goods, but whether they choose to sell them to you is at the liquidator’s discretion.
It is worth noting that it’s likely that any goods you receive or purchase at this point will not come with any guarantee (unless they are already covered by a manufacturer guarantee). This could, therefore, have a knock-on impact on any guarantee that your business could offer its customers.
Our business has received damaged/faulty goods, is there anything we can do?
If you have received goods or services that are unsatisfactory, then unfortunately you cannot insist that the liquidator resolves the issue. The fall back is an unsecured claim in the insolvent estate, unless the company had appropriate insurance in place to cover these circumstances.
However, it is worth exploring whether or not your supplier is a member of a trade association, as the trade association may have a bonding scheme that covers you for this situation.
Our supplier has property owned by us on their site. Can we get it back?
Yes. If the supplier that has gone into liquidation has goods, property or tooling owned by you on their site, then you are entitled to have these items returned. You should write to the liquidator as soon as you can, including an itemised list of your property and asking for the immediate return along with the promise that all items will be kept safe until returned.
Have we answered all your questions? If you would like to talk this through with one of our business rescue experts, use our booking system to arrange a meeting or contact us directly.