Insolvency & Debt Recovery

Insolvency and debt recovery deal with what happens when a debt is not paid.

Recovery usually begins without litigation: a demand, then negotiation of a repayment arrangement, and only then proceedings. Where court action is needed, a judgment is the beginning rather than the end. It must be enforced, through writs of execution against goods, garnishee proceedings against money held by third parties, charging orders over land, or the appointment of a receiver under a debenture.

Where a company cannot pay its debts, the Corporate Insolvency Act governs what follows. It provides for business rescue as an alternative to liquidation, for receivership where a secured creditor enforces its charge, and for winding up, whether by the court or voluntarily. Each route affects creditors differently, and a creditor’s position depends heavily on whether its debt is secured, preferential or unsecured.

Timing matters throughout. Security must have been properly perfected before insolvency for a lender to rely on it, transactions entered into in the period before insolvency may be open to challenge, and claims must be proved within the periods the Act allows.