Insolvency allocates losses when businesses fail, but outcomes for ordinary creditors are often thin. The Insolvency Service’s own review of creditors’ voluntary liquidations found that in 86% of sampled cases no payments were made to creditors and the median recovery rate across all creditors was 0%. Median costs equalled 163% of the value of the estate, underlining why unsecured creditors routinely see nothing back. These figures frame the policy debate better than rhetoric.
How the regime is delivered matters. Since the Insolvency Act 1986, most casework has been carried out by licensed insolvency practitioners rather than civil servants, with regulation through Recognised Professional Bodies and oversight by the Insolvency Service. In September 2023 the government decided not to replace this model with a single statutory regulator, while signalling future measures such as firm-level regulation and a public register. The structure remains mixed public–private, with arm’s‑length oversight.
Market concentration and conflicts have drawn scrutiny in Parliament. During the Carillion inquiry, select committees highlighted that large professional services firms had been paid across the company’s lifecycle and then again in the insolvency, prompting calls for stronger market safeguards. The committee record sets out those concerns in detail and remains a reference point for reform discussions.
Statutory fees also sit near the front of the queue. Since 21 July 2016 a fixed Official Receiver general fee of £6,000 is charged on each new bankruptcy or winding‑up order, replacing a percentage‑based Secretary of State fee. Where the Official Receiver acts as trustee or liquidator, an additional 15% of assets realised is charged to cover those functions. These charges apply before distributions to most creditors.
Concerns about professional costs led to changes in 2015 requiring upfront estimates and clearer information so creditors could challenge proposed remuneration. Those moves followed the Office of Fair Trading’s market study and the Kempson review, both of which found that fee‑control mechanisms worked poorly when no powerful creditor was present to negotiate. Transparency has improved, but unsecured creditors still struggle to influence economics once a firm is already insolvent.
Distribution priorities have shifted further in the state’s favour. From 1 December 2020 HM Revenue & Customs regained secondary preferential status for certain taxes collected on behalf of others (including VAT and PAYE), moving ahead of floating charge holders and other unsecured creditors in the statutory waterfall. HM Treasury’s policy papers projected additional receipts building to about £185 million a year by 2023–24 from this change.
Despite regular references to a “rescue culture”, liquidations still dominate. In 2024, creditors’ voluntary liquidations accounted for 79% of company insolvencies in England and Wales, with compulsory liquidations at 14% and administrations at 7%. The profile suggests many businesses enter formal processes when little value remains, limiting the scope for restructurings and creditor recoveries.
Directors face heightened personal sanctioning when things go wrong. In 2024–25 the Insolvency Service disqualified 1,036 directors, of which 736 cases related to abuse of COVID‑19 loan schemes; the average ban was around eight years. During the pandemic, wrongful‑trading liability was temporarily suspended to keep viable firms trading, first for 1 March–30 September 2020 and again from 26 November 2020 to 30 June 2021, before normal rules resumed.
The data underpin the experience of unsecured creditors. In the CVL study, 90% of cases saw no distribution to unsecured creditors; where distributions did occur, the median was 9% of their claims. The same study recorded the median amount paid to insolvency practitioners at 21% of assets realised, with the rest of costs covering legal work, insurance and statutory requirements. For many suppliers, a write‑off remains the realistic planning assumption.
Crucially for digital assets, Parliament has updated enforcement powers. The Economic Crime and Corporate Transparency Act 2023 amended the Proceeds of Crime Act to simplify seizure and recovery of cryptoassets, including powers to transfer assets from unhosted wallets and, in limited circumstances, to destroy cryptoassets where realisation is not practicable or would be against the public interest. These provisions began to come into force in April 2024, with operational guidance issued in 2024.
Alongside enforcement, the regulatory perimeter for payment‑style cryptoassets is being built out. The Financial Services and Markets Act 2023 created a framework for “digital settlement assets”, enabling FCA conduct regulation of non‑systemic stablecoin firms, Bank of England prudential oversight of systemic payment systems using stablecoins, and the application-by secondary legislation-of the Financial Market Infrastructure Special Administration Regime to systemic stablecoin firms. This is intended to prioritise service continuity and safe return or transfer of customer funds if a systemic issuer or service provider fails.
In November 2025 the Bank of England proposed the detailed regime for sterling‑denominated systemic stablecoins, including temporary holding limits and requirements on the composition of backing assets, with joint working alongside the FCA. The consultation sets out how firms would transition into the Bank’s remit if recognised as systemic by HM Treasury, with final rules expected after further consultation.
For payment and e‑money institutions, a dedicated special administration regime has applied since 2021. Its primary objective is prompt return of safeguarded customer funds, supported by tools such as bar dates and transfer arrangements. This is materially different from ordinary corporate insolvency and signals how consumer‑facing financial firms are treated when value is largely held on trust for users.
What this means in practice is predictable. In conventional corporate failures, statutory fees and preferential claims-including HMRC’s restored status-tend to be met first, while unsecured creditors often see little to no recovery. Where firms hold customer funds under safeguarding rules, special administration focuses on returning those funds rather than sharing a depleted estate. For cryptoassets, enhanced seizure and, in extremis, destruction powers will interact with insolvency where law enforcement has an interest, while any future systemic stablecoin failure would be run to public‑interest objectives under FMI SAR rather than purely creditor maximisation. Policy signals are clear; risk‑holders should price for these statutory priorities.