The First Seventy-Two Hours: What a Supplier Should Do When a Customer Enters Administration

The email usually arrives without warning, often from a finance director who has been avoiding your calls for a fortnight: the company has appointed administrators. On the same morning, a pallet of stock may be sitting on your van outside their goods-in door, three invoices may be within terms, and a fourth may be 70 days overdue. What happens in the next 72 hours will determine whether you recover a meaningful proportion of that exposure or join a long list of unsecured creditors receiving pence in the pound.

Most suppliers lose money in those three days through indecision rather than through the insolvency itself. The following sequence is a practical framework. It is general information, not legal advice, and where sums are substantial you should take advice from a licensed insolvency practitioner or a solicitor experienced in insolvency.

Hour zero: establish exactly what has happened

Administration is not the same as liquidation, and a notice of intention to appoint is not the same as an appointment. Check Companies House for the filed notice and The Gazette for the appointment itself. The distinction determines what you may lawfully do next.

Where directors file a notice of intention to appoint administrators, an interim moratorium ordinarily applies for up to ten business days. During that period you cannot commence or continue legal proceedings, enforce security, or take steps to repossess goods without the permission of the court. This is the single most important point in the playbook: do not send a driver to recover stock, and do not issue a county court claim, on the assumption that speed beats procedure. A premature recovery attempt can expose you to costs and undermine a legitimate claim.

Where an administrator has been formally appointed, the moratorium continues. Where the company has moved to creditors' voluntary liquidation, the moratorium gives way to a different regime, but the practical steps for a trade creditor remain similar.

Stop the supply, and stop it in writing

If goods are in transit, act immediately. Under the Sale of Goods Act 1979 a seller may exercise a right of stoppage in transit where the buyer becomes insolvent and the goods have not yet reached them. Telephone the haulier, confirm the consignment reference in writing, and instruct them to hold the load. This right is time-critical and disappears the moment the goods are delivered.

For undelivered orders, confirm the suspension in writing the same day, referencing the insolvency event. If the administrator asks you to continue supplying, that is a commercial decision rather than a legal obligation, and it can be a good one — but only on terms agreed in writing, with shortened payment terms, and with confirmation that the office-holder accepts liability for post-appointment supply as an expense of the administration. Supply made without that written confirmation risks being treated as ordinary unsecured debt.

Retention of title: the paperwork decides, not the intention

Many suppliers believe they have retention of title because the clause appears in their standard terms. Whether it survives contact with an administrator depends on evidence you can produce within days.

Three tests usually decide it. First, incorporation: was the clause part of the contract that governed this particular delivery, or did the buyer's purchase order terms prevail? Second, identification: can you point to specific goods still in the buyer's possession, unmixed and unprocessed? Clauses covering goods that have been manufactured into finished products, or sold on, are far harder to enforce, and an all-monies clause is of limited use if you cannot tie it to identifiable stock. Third, prior charges: where the buyer has granted a floating charge over its inventory to a lender, that charge will often capture the stock before your claim does, and administrators frequently reject retention claims on precisely this basis.

Assemble the file at once: signed terms, the order confirmation, delivery notes, invoices that reference the clause, and photographs or stocktake evidence if you can obtain it. Present the claim in writing to the office-holder promptly and ask for a decision. Do not assume that a refusal is final, but do not spend months on a claim worth less than the cost of pursuing it.

Register, prove, and diarise

Submit your proof of debt early. This is a short document setting out the amount claimed, supported by a statement of account and copies of invoices, together with any interest claimed under your terms. The office-holder will adjudicate it, and you should ask for written confirmation that it has been received and accepted.

Understand where you sit. Trade debts are unsecured, and since December 2020 HMRC ranks as a secondary preferential creditor for VAT, PAYE and employee-related taxes, which places it ahead of floating-charge holders and unsecured creditors. Some recovery may still arise through the prescribed part, the ring-fenced slice of floating-charge realisations reserved for unsecured creditors, but for most small suppliers the realistic outcome is modest. There is no advantage in not claiming, however: an unproved debt receives nothing.

Record the dates that matter: the deadline for submitting claims, the date the administrator's proposals are circulated (normally within eight weeks of appointment), and any creditors' decision procedure. Diarise them and, where the sums justify it, participate.

Protect the parallel positions

Two consequential matters are routinely overlooked.

If you hold credit insurance, notify the insurer of the insolvency event immediately. Policies typically require prompt notification and many contain strict conditions; a notification sent three weeks late can invalidate an otherwise straightforward claim.

If you supplied on terms that include a personal guarantee from a director, or if you can evidence a misrepresentation that induced further supply, obtain advice quickly. These are separate causes of action from the insolvency itself, with their own limitation considerations.

The cost of hesitating

Three failures account for most supplier losses in this situation: continuing deliveries because a buyer's colleague asked nicely, letting the retention-of-title file go unassembled until the stock has been sold, and missing the claims deadline. None of them requires bad luck; each requires only a few days of inaction.

The discipline is to treat the first 72 hours as a project with a checklist, an owner and a written record. Confirm what has happened, stop the bleeding, evidence the retention claim, prove the debt, notify the insurer, and diarise every subsequent date. In an insolvency, the creditor who is organised early is rarely made whole — but is very often the creditor who loses least.