Undoubtedly, at some time, most companies will experience some kind of financial problem that will lead to directors experiencing stress. How you deal with those problems determines the future of your business.
Initially the problems with creditors start once your own cash flow prevents you from making the payments that the creditor expects – this usually leads to a few calls followed by a few letters, eventually followed by legal action if you do nothing.
We’ve set out below a few of the more common questions that we are asked together with our advice:
I’ve received a County Court Judgement – what should I do?
Once your creditor’s patience has expired, the usual course of action taken by them, will be to issue you with a County Court Summons. You then have 14 days from receipt of this summons to do one of the following:
- Pay it
- Dispute it
- Try and open a dialogue with the creditor to reach payment terms
- Write to the court (if you agree that its due) and explain your financial position and make an offer to pay. The forms for this will be enclosed with the summons.
If you do none of the above, then after the 14-day period, the creditor can then go back to court and seek judgement. If the creditor obtains judgement against you, that is serious – they can then either seek to send bailiffs in to your company to look at removing assets or look to apply to the court for a winding up order to be issued against your company.
Whatever reasons have led to your creditor issuing a court summons against you are secondary to you actually dealing with it as soon as the summons arises. If in any doubt whatsoever, please call us immediately – we will advise you exactly what to do at no cost whatsoever to you.
I’ve received a statutory demand – what should I do?
A statutory demand is usually issued by a creditor who’s aim is to focus your mind on paying them. Unlike a County Court summons, there is virtually little or no cost to the creditor in issuing such a demand. The demand, once received by you, gives you 21 days in which to:
- Pay it
- Dispute it
- Try and open a dialogue with the creditor to reach payment terms.
If you do nothing, then after 21 days, the creditor can apply to the court to issue a winding up order against your company.
It is absolutely imperative, that the second you receive a statutory demand that you deal with it. If you can demonstrate that there is a genuine dispute over the debt claimed, then usually that is sufficient to prevent the creditor from applying for a winding up order. You must though confirm the nature of the dispute in writing to the creditor and seek confirmation that they will not proceed further until the dispute has been resolved.
If you are in any doubt as to what to do, then again, please call us immediately – we are extremely well versed in dealing with such demands.
The minimum amount for a statutory demand to be served is £5000.
I’ve received a winding up order – what should I do?
This now is really serious – this effectively means that your creditor has already either obtained judgement against you, or has already served a statutory demand that has expired. Once you receive a winding up order, it will tell you the date of the hearing – this could be as many as 8 weeks ahead. At some point prior to the winding up hearing, the petitioning creditor will advertise the hearing in the London Gazette – this is a Government publication dealing with all legal and statutory notices. Once the hearing is formally advertised in the London Gazette, your bank will freeze your account immediately – they have a statutory obligation to do so. It may take them a few days to communicate this to you – the first you will know about it is when you try to make a payment.
Receiving a winding up order is really serious – it’s not the end of the road, but it does need dealing with immediately – call us as soon as you receive the order – we will speak to the lawyers acting on behalf of the creditor to try and find a solution to the problem. If you do nothing, then the order will be made and the Official Receiver will be appointed Liquidator. At that point, you have then lost not only control of your company, but the company itself.