Officials still sell insolvency as creditor protection and market discipline. The numbers tell a different story. In 2024, 79% of corporate failures were creditors’ voluntary liquidations, with administrations and CVAs a distant minority. That is a closure culture, not a rescue culture, and it consistently leaves unsecured creditors with nothing. The Insolvency Service’s own annual release confirms the dominance of liquidations.
How we got here matters. The Insolvency Act 1986 created a licensed private profession with sweeping powers-liquidators, administrators and trustees-authorised by “recognised professional bodies” and supervised at arm’s length by the Insolvency Service. In short: state-sanctioned power, privately exercised, and largely policed by the profession itself.
When large collapses hit, the same firms often appear on every side of the table. The Carillion inquiry captured it starkly: select committee chairs criticised the Big Four’s lucrative roles around the failure and called out conflicts. Those statements were published on Parliament’s own site alongside fee evidence. Directors and suppliers took the pain; the professional market got paid.
Follow the money and you quickly encounter statutory charges to the estate. Since 9 January 2025 the Official Receiver’s fixed “general fee” has risen to £7,200 on every bankruptcy or court winding‑up order, with a 15% realisations fee where the OR acts as liquidator or trustee. Public‑interest wind‑ups under section 124A now carry a £13,500 administration fee. These charges apply before most creditors see a penny.
HMRC then steps forward. Crown preference returned on 1 December 2020. VAT, PAYE, employee NICs, student loan and CIS deductions rank as secondary preferential debts, jumping ahead of floating‑charge holders and all unsecured creditors. Government’s own guidance spells it out; that priority narrows the room for deals and shrinks the pot for trade suppliers.
What do unsecured creditors actually recover? A major Insolvency Service study of CVLs found that in 90% of cases unsecured creditors received 0% of their debt. Across all creditor classes, 86% of cases delivered no return at all. That is the operating reality in the UK’s most common corporate procedure.
Why are fees so hard to rein in? The Office of Fair Trading concluded in 2010 that unsecured creditors were structurally weak in this market and that fee control mechanisms failed. The government’s 2015 rule changes requiring advance fee estimates were meant to cap costs, but official summaries acknowledge those reforms were a response to OFT and Kempson findings that controls ‘did not work as intended’ for unsecured creditors. Little has changed on the ground.
Ministers talk up rescue. Policy pulls the other way. With HMRC now preferential, CVAs and plans must satisfy the taxman in full for those categories, handing HMRC an effective veto in many small and mid‑market workouts. Practitioners flagged the damage to rescue incentives when the policy went live in 2020-and they were right.
Meanwhile, directors are paraded as the problem. In 2024–25, the Insolvency Service disqualified 1,036 directors; 736 of those bans were for Covid loan abuse, with average bans around eight years. The agency is doing its job-but the volume and messaging push accountability onto individuals while the structural hierarchy that starves unsecured creditors of value remains untouched.
Even government concedes that strict personal‑liability rules can choke viable rescues: wrongful trading was suspended twice during the pandemic-1 March to 30 September 2020 and again 26 November 2020 to 30 April 2021-to stop early shutdowns. Those protections were temporary. The chill returned with the rules.
Now to crypto-the newest carve‑up. The Economic Crime and Corporate Transparency Act 2023 arms law enforcement with civil recovery powers to seize, freeze and even convert cryptoassets to cash before forfeiture. Wallet freezing orders can lock value away for up to two years (extendable to three in cross‑border cases). If those assets are forfeited as criminal property, they never reach the insolvent estate. For directors and creditors, that is another leakage point-value exits via state powers before any distribution.
At the same time, the regulatory perimeter is closing in. On 29 April 2025 HM Treasury published draft legislation to bring cryptoasset activities-exchanges, custodianship, issuance and more-inside the FSMA regime. Firms interacting with UK customers will need FCA permissions, with a transition period. If your business holds client tokens or runs a trading venue, any failure after commencement will sit under both insolvency law and a new conduct rulebook.
So who actually benefits today? In compulsory liquidations and bankruptcies the state levies its fixed fee up front; if the OR realises assets, another 15% is taken. HMRC’s preferential debts then lift it above unsecureds. Secured lenders with fixed charges still sit at the head table. Unsecured creditors are last-and in the vast majority of CVLs they receive nothing. This is policy by design, not accident, and it rewards those already near the front of the queue.
What should directors do to avoid being processed by this machine? First, move early. Consider a Part A1 moratorium to buy time, ring‑fence creditor action and assess whether a CVA or a restructuring plan with cross‑class cram‑down is achievable. If tax arrears are the key blocker, push HMRC for a Time to Pay arrangement and document affordability-HMRC’s own guidance invites it. None of these routes is painless, but they are director‑led options that keep control away from a fire‑sale liquidation.
For creditors, the practical response is to assume nil recovery unless you have security or set‑off, then act accordingly. Demand credible fee budgets from IPs, challenge them where the law allows, and insist on transparency around crypto holdings and any law‑enforcement restraints. The data is clear: unless challenged, the default outcome is that professionals and preferential creditors get paid and you do not.
The fix is straightforward in principle: curb statutory skims in asset‑light estates, revisit HMRC’s preferential status for taxes collected in trust, and hard‑wire genuine fee oversight where unsecureds carry the risk. Until then, directors and trade creditors must use the few tools that exist, early and aggressively, to stop value bleeding away before anyone outside the inner circle sees a return.