Grant McCall explains the issues involved with debt recovery during a recession.
It is always a strain on business relations when a customer or client fails to pay their invoice within 30 days, a strain which is only exacerbated by recessionary times. Over the past 6 months I have been approached by an increasing number of business clients who have been unable to recover payment from their customers either in whole or in part.
There are various methods of putting pressure on debtors to pay the amounts which are owed to their creditors. Perhaps the most powerful tool available, provided that the Debtor owes at least £750, is the Statutory Demand. The Demand sets out the contractual position between the parties, the amount claimed, and can include a claim for interest and the creditors expenses incurred in connection with serving the Demand. The Debtor must respond to a Statutory Demand by paying the sum outstanding or by applying to the court within 18 days to set it aside. If the Debtor does nothing within 21 days the Creditor can apply to wind up a Debtor Company or to make an individual debtor bankrupt.
As an alternative to a Statutory Demand the creditor could issue County or High Court Proceedings. However the Statutory Demand comes with a threat of bankruptcy or winding up whereas the result of a successful court case is merely a judgement to pay a fixed sum.
In all cases as a prelude to any action the financial status of the debtor must be considered. There is no merit in serving a Demand if the Debtor has no assets with which to pay should the Demand need to be enforced.
It is clear that there will be risks in any form of debt recovery process. However the Statutory Demand is a quick and often potent tool which can be served without having to incur any court fees and without delay.
Grant and the other members of the Commercial Team offer further advice and information upon legal issues for businesses (including a free first half hour consultation). E-mail firstname.lastname@example.org or telephone 0117 9898510. AMD have offices at Henleaze, Shirehampton and Clifton.
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