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Company bankruptcy – make former employees and customers the primary creditors.

Comment 30th July 2010

The former employees and customers of companies placed in receivership should have

priority when the administrators make payments with the winding-up of the company..

Why does this matter?

As the closure of a nationwide car factors chain during the recession and the Farepak scandal have highlighted, customers and former employees of companies are last on the list of creditors when a company is placed in receivership.


In the case of the motor factors chain there is circumstantial evidence that the company placed itself in receivership the day before it was due to run its payroll, presumably to maximize the money left to pay the banks and other creditors. This reportedly left at least one ex-employee homeless and sleeping in his car.


Employees and customers should have priority in any disposal of assets and payouts from the administrators not banks or HMRC.

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