Bad debt is a major issue for many businesses in these hard economic times \u2013 not taking robust steps to collect it could be fatal to your own financial position.<\/p>\n\n\n\n
So if you are being given the run-around by a recalcitrant corporate debtor, take advice on whether an appropriate and cost-effective remedy for you might be an application for the company\u2019s liquidation (\u201cwinding-up\u201d).<\/p>\n\n\n\n
Cynical misuse of the liquidation process as a debt collection tool or to avoid any genuine disputes over liability is likely to end badly for you (you risk a heavy costs order for \u201cabuse of process\u201d). Be aware also that if your application is successful and a liquidation order is granted, you might be in for more than your own legal costs (ask for advice on the \u201cdanger of contribution\u201d in winding-up matters).<\/p>\n\n\n\n
But properly used, a liquidation application will certainly get your debtor\u2019s attention very effectively. It\u2019s often the only strategy that has any effect on a \u201cdodging debtor\u201d. The threat of a liquidator knocking at the door to take over control of the company is a great motivator to actually do something – pay up, or make a genuine settlement offer, or at least disclose whether something is in dispute so you can deal with it.<\/p>\n\n\n\n
The practical challenge can however be in proving that the debtor is actually financially unable to pay its debts. That\u2019s often not easy, and mere failure by the debtor to pay the debt is not sufficient. <\/p>\n\n\n\n
However there is a shortcut – serve on the company\u2019s registered office a demand for the debt. You may hear it referred to as a \u201csection 345 letter\u201d, that being the section of the Companies Act which makes this all possible. If the debt is not paid (or secured or resolved by agreement) within three weeks, the company is deemed<\/em> to be unable to pay its debts, making a liquidation application much easier to support.<\/p>\n\n\n\n The 2021 High Court case of a municipality struggling to recover debts due to it by two property companies provides a good example of this letter of demand process in action\u2026<\/p>\n\n\n\n As an end note, it is essential that your letter of demand is correctly drawn and correctly served.\u00a0 If it isn\u2019t, your application is headed for failure – and that can be a very expensive exercise.<\/strong><\/p>\n\n\n\n Disclaimer:<\/strong> The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your professional adviser for specific and detailed advice.<\/p>\n\n\n\n \u00a9 LawDotNews<\/p>\n","protected":false},"excerpt":{"rendered":" “When debtors once have borrowed all we have to lend, they are very apt to grow shy of their creditors’ company” (John Vanbrugh) Bad debt is a major issue for many businesses in these hard economic times \u2013 not taking robust steps to collect it could be fatal to your own financial position. So if […]<\/p>\n","protected":false},"author":101014,"featured_media":4786,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[23,24],"tags":[],"class_list":["post-4785","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-debt-recovery","category-insolvency-liquidation"],"yoast_head":"\nLetters of demand sink two property companies<\/h6>\n\n\n\n