Essentially, you have no choice but to commence legal action. If the debt is due and payable, you can either seek a County Court Judgement (if the debt is disputed or as the first step before instructing a Bailiff to recover goods) or issue a petition for a compulsory liquidation of the company (a winding-up petition). If you are owed money by a company, there is no need to issue a Statutory Demand for payment; if you are owed money by an individual, you need to go through the process of issuing a Statutory Demand or a letter before action before proceeding to a CCJ or to a bankruptcy petition.
Petitions for winding-up or bankruptcy are not particularly cheap. To wind-up a company your debt must be at least £750, and the Court fees are (currently) £1,630. The Court does not like petitions being used as crude form of credit control; you need genuinely to have reached the end of the road in other collection methods. The minimum debt for a personal bankruptcy is £5,000. Petitions are not straightforward to prepare or serve.
In either a compulsory liquidation or a bankruptcy, the Official Receiver (“OR”) is initially appointed, although if you are the petitioning creditor you can usually get your own choice of Insolvency Practitioner to be appointed in place of the OR. The process takes time, and during this time there is a risk that assets will be dissipated and the prospect of any repayment of your debt will be reduced.
Incurring the cost of a petition is often not that attractive: you remain an unsecured creditor, and whilst your petition costs rank ahead of almost all other costs in the liquidation, there is no guarantee you will even get that money back.
You might prefer to see if you can get your customer to agree to talk to us. We can (at the very least) then advise you if it is worth taking any further action. Perhaps your customer will accept that his business is insolvent and will take steps himself to commence a liquidation or administration. These are appointments we can take so, whilst we have to act in the interests of creditors as a whole and cannot be partisan in favouring you ahead of other creditors, you will at least know that your customer is taking proper advice and the prospects of a recovery of some of your debt are being maximised.
If you think that you need to start to take recovery action against one of your customers, come and talk to us first.
The latest statistics for insolvencies in England and Wales covering the last quarter for 2017 reflect a difficult year for companies and individuals. The Association of Business Recovery Professionals, R3, have highlighted a number of trends in the latest insolvency figures from the government. Corporate Insolvencies Corporate insolvencies rose by 2.5% to 15,112 in 2017 […]
The Financial Conduct Authority (FCA) is considering a clampdown on companies that provide high-cost credit to consumers. This could include imposing a cap on interest rates charged. Such a move would be a follow up to the FCA’s 2015 clampdown on the high interest rates charged by so-called “payday” loan companies. It is understood that […]