If a company that owes you money has gone into liquidation, you may eventually receive a document headed Notice of Intended Dividend. The terminology can be misleading. In insolvency, a dividend is not a payment to shareholders. It is money distributed to creditors from the funds available in the insolvency.
Receiving the notice generally means that the office-holder intends to make a distribution and is giving relevant creditors a final opportunity to establish their claims before it is calculated. If you have not already submitted a proof of debt, the deadline on the notice matters.
Worried what happens to you as a director?
You do not usually need to wait for every set of statutory accounts to be filed before discussing liquidation. Anderson Brookes can help you establish what information is actually needed and what should happen next.
What Does a Notice of Intended Dividend Mean?
A Notice of Intended Dividend tells creditors that the insolvency practitioner intends to distribute available funds. Before a dividend can be calculated, the liquidator or other office-holder needs to know which creditors are entitled to participate and how much each valid claim is worth.
The Insolvency Rules 2016 therefore require a notice to be issued to relevant creditors who have not yet proved their debts before the intended dividend is declared. The notice identifies a last date for proving, giving those creditors an opportunity to submit their claims. That deadline must be at least 21 days after the date of the notice, and the proposed dividend or distribution is normally intended to be declared within two months of the deadline.
Receiving the notice does not mean you will recover everything you are owed. The amount ultimately paid depends on factors including:
- how much money has been realised
- the costs and expenses of the insolvency
- which class of creditor you fall into
- how many other valid claims exist
- the value of those admitted claims
Our guide to who gets paid first in liquidation explains the statutory order in which different creditor groups receive money.
Why Have You Received a Notice?
You may receive a Notice of Intended Dividend because the office-holder’s records show that the company owes you money but you have not yet formally proved that debt. A proof of debt is the creditor’s formal claim in the insolvency. It gives the office-holder the information needed to assess whether the debt should be admitted and, if so, for how much.
A notice does not necessarily mean the liquidator disputes your claim. They may simply need you to complete the formal claims process before including it in the forthcoming distribution.
The rules also contain special provisions for smaller debts. Where the accounting records or Statement of Affairs show that a creditor is owed £1,000 or less, the office-holder may in certain circumstances treat that debt as proved without requiring a separate proof.
If they intend to do this, the notice should state the amount they believe is owed. If that figure is wrong, you need to tell the office-holder by the stated deadline and may need to submit a formal proof. The Insolvency Service’s guidance on distributions to creditors explains how these small-debt provisions operate.
Anderson Brookes’ company closure resource also explains the proof of debt alongside other common insolvency forms and documents.
What Information Should the Notice Contain?
A Notice of Intended Dividend should give you enough information to understand what is planned and what you need to do.
The notice should state:
- that a dividend or distribution is intended
- whether it will be interim or final
- the last date for proving
- where proofs of debt should be delivered
- any required information about small debts being treated as proved
There are two particularly important timeframes to look for.
At least 21 days
The last date for proving must be no less than 21 days after the date of the notice.
Within two months
The office-holder states an intention to declare the dividend or make the distribution within two months of the last date for proving.
That makes the date on your notice important. If action is required from you, do not simply add the letter to the pile of insolvency correspondence you have already received.
Don't ignore the proof of debt deadline
If you have received a Notice of Intended Dividend and have not already proved your debt, check the deadline straight away.
Missing it does not necessarily extinguish the underlying debt. However, a creditor who proves too late cannot require a dividend that has already been declared to be undone simply so that their claim can be included.
If further money later becomes available, there can be circumstances in which a late-proving creditor receives the dividend they previously missed before the next distribution is made. There may be no further funds, particularly where the notice concerns a final dividend.
If you are unsure whether your claim has already been admitted, contact the insolvency practitioner named on the notice.
What Is a Proof of Debt?
A proof of debt formally tells the office-holder that you are claiming money from the insolvent company. The Insolvency Service provides an official proof of debt form, although another form can be used if it contains the information required by the rules.
Depending on the claim, you may need to provide information such as:
- your name and contact details
- the amount you are claiming
- why the money is owed
- whether any part of the debt is secured
- whether you have received any payments against it
- supporting evidence
That evidence could include invoices, account statements, contracts, purchase orders or relevant correspondence.
Submitting a claim does not automatically mean the whole amount will be accepted. The office-holder reviews proofs and can admit them in full, admit part of the claim or reject them. If a proof is rejected, the creditor should be given reasons and has a route to challenge that decision.
Not sure what to do about company debts?
Answer a few questions about your company’s debts and trading position. Anderson Brookes can review the circumstances and explain whether liquidation or another option may be appropriate.
Does Receiving a Notice Mean You Will Definitely Get Paid?
It is generally a positive sign that the office-holder expects to make a distribution, but it does not mean you will receive the whole debt. In many insolvent liquidations there is simply not enough money to repay every creditor.
Different categories of creditor also rank differently. Depending on the company and its assets, money may need to meet secured claims, liquidation expenses, preferential debts and other higher-ranking claims before a particular group receives a dividend.
Where there is insufficient money to pay all creditors within the same class in full, the available sum is generally shared proportionately.
For example, imagine there is £20,000 available for a particular group of unsecured creditors and their admitted claims total £200,000. In a simplified example, that represents a dividend of around 10 pence in the pound. A creditor with an admitted claim of £10,000 would therefore receive approximately £1,000 rather than the full £10,000.
The actual calculation in an insolvency can be more complicated, particularly where there are different creditor classes, security or the prescribed part to consider.
What Is the Difference Between an Interim and Final Dividend?
Your notice should tell you whether the proposed dividend is interim or final.
Interim dividend
An interim dividend is paid before the insolvency has completely finished. There may still be assets to realise, claims to resolve or other issues to complete. Creditors could therefore receive another dividend later if further funds become available.
Final dividend
A final dividend is intended to be the final distribution to the relevant creditor class. Once it has been dealt with, the office-holder can move closer towards completing that part of the insolvency administration.
The notice issued when a dividend is actually declared provides information about matters including the funds available and the rate of dividend.
What Happens After the Last Date for Proving?
The process does not move directly from the deadline to money appearing in a creditor’s bank account.
The proving deadline passes
Creditors who need to prove should submit their claims by the last date stated in the notice. Check the delivery instructions carefully so the proof reaches the correct person or address.
Creditor claims are reviewed
The office-holder considers the proofs received. Unless they have already dealt with them, proofs submitted for the dividend will generally need to be admitted, rejected or otherwise provided for shortly after the last date for proving.
The dividend is calculated
Once the relevant claims and available funds are known, the office-holder can calculate what can be distributed. Money may also need to be retained for unresolved or disputed claims and other costs.
The dividend is declared
The intended dividend will normally be declared within two months of the last date for proving. There are circumstances in which it can be postponed or cancelled, for example where disputes concerning creditor proofs are still being dealt with.
Creditors are notified and paid
The office-holder gives notice of the dividend and makes the appropriate payments to creditors whose claims have been admitted. The amount received will reflect the agreed claim, available funds and applicable insolvency priorities.
What Happens if You Miss the Proof of Debt Deadline?
Missing the date does not automatically mean the debt itself stops existing, but it can affect whether you participate in that particular dividend. Once a dividend has been declared, a creditor who failed to prove in time generally cannot require the office-holder to disturb that distribution.
Suppose you prove your debt later and the insolvency subsequently has enough money for another dividend. The rules contain provisions allowing a late-proving creditor to catch up on dividends they missed before further money is shared with creditors. The difficulty is that there may never be another distribution.
That is particularly important where the notice states that the intended dividend is final. In practical terms, missing the deadline could therefore mean missing the opportunity to receive money from the available funds. If the deadline has already passed, contact the office-holder rather than assuming there is nothing you can do.
Why Might a Notice of Intended Dividend Appear in The Gazette?
Insolvency notices are often published in The Gazette, the UK’s official public record. For a first intended dividend, the office-holder may need to publish a notice giving information including the intention to make the distribution and the deadline and location for submitting proofs.
The Insolvency Service’s guidance on the publication of insolvency information explains when notices are normally advertised in The Gazette and when an additional notice may not be required.
This is why you might discover that a company is approaching a creditor distribution while searching public insolvency notices, even if you have not personally been following every stage of the liquidation.
Where Does a Dividend Fit Into the Liquidation Process?
A dividend usually comes some way into the administration of a liquidation. By this stage, the liquidator may have carried out considerable work to identify company assets, realise them, establish creditor claims and deal with the costs and priorities that apply.
A simplified sequence looks like this:
- The company enters liquidation.
- The liquidator takes control of its affairs.
- Assets are identified, valued and realised.
- Creditors submit claims.
- The liquidator establishes which claims can participate.
- Available funds are distributed according to the statutory priority.
- Remaining matters are completed before the company is ultimately dissolved.
Our guide to the Creditors’ Voluntary Liquidation timeline looks at how these stages fit together from the initial decision to liquidate through to asset realisation, distributions and closure.
Is your own company struggling to pay creditors?
A Notice of Intended Dividend usually appears later in an insolvency. If your own company is still trading but cannot pay HMRC, suppliers, lenders or other debts, getting advice earlier gives you more opportunity to understand the available options.
Notice of Intended Dividend FAQs
What does Notice of Intended Dividend mean?
It means an insolvency office-holder intends to make a distribution to creditors and is completing the claims process before calculating that payment. Relevant creditors who have not yet proved their debts may be given a final deadline to do so.
Is a Notice of Intended Dividend good news?
For a creditor hoping to recover money, it generally indicates that a distribution is expected. However, it does not guarantee payment in full, and the eventual dividend could represent only a proportion of the amount owed.
How long do I have to submit my proof of debt?
The last date for proving stated in the notice must be at least 21 days after the notice was issued. Check the actual date on your notice rather than assuming you have exactly 21 days remaining when you receive it.
What if I already submitted a proof of debt?
You will not normally need to submit the same claim repeatedly simply because a Notice of Intended Dividend has been issued. However, check the notice and contact the office-holder if you are unsure whether your claim has been received or admitted.
What if the amount shown on my notice is wrong?
If the office-holder intends to treat a small debt of £1,000 or less as proved but the amount shown is incorrect, notify them by the stated deadline. You may then need to submit a proof establishing the amount you believe is owed.
Does a Notice of Intended Dividend mean I will be paid in full?
No. How much you receive depends on the money available, your creditor status and the overall value of admitted claims. Some insolvencies produce substantial dividends, while others result in creditors receiving only a small proportion of their debt.
Can I submit a claim after the deadline?
A late claim can still have relevance, but it cannot normally disturb a dividend already declared. If further funds subsequently become available, you may be able to receive a previously missed dividend before the next distribution. There is no guarantee that another distribution will take place.
Need Help Understanding the Liquidation Process?
If you are a creditor who has received a Notice of Intended Dividend, the insolvency practitioner named on the notice is normally the right person to confirm whether your claim has been received, what amount has been admitted and what you need to submit before the deadline.
If you are a company director researching the liquidation process because your own business cannot pay its debts, that is where we can help. At Anderson Brookes, our licensed insolvency practitioners help directors understand their company’s financial position, the options available and what to expect if a Creditors’ Voluntary Liquidation becomes necessary.
Call Anderson Brookes on 0800 1804 935 for free, confidential initial advice.