Reply to: Client behind on payment and looks like they are about to go bump...

[Safe Collections]

The thing is though that it looks like the directors are continuing to seek ways out of their situation, you don't look for CVAs unless you have some hope of turning your business around. The OP has two choices, wait with the rest of the creditors for an unforeseen amount of time until they finally go bang, and they will if HMRC refuse to play ball with the CVA, or try to get ahead of the queue by suing, aiming for summary judgement and getting the bailiffs in to get goods before the company finally falls over. Might sound sharp but I'd be going for any avenue possible to get my money, £25,000 in the hole means the costs of a DIY lawsuit are trivial in comparison.

Whilst we would agree with you in principle, we don't buy the CVA line at all. First ClientCo asks if the OP will agree. Next thing we hear is the CVA was turned down by HMRC.

We would like to know if the OP ever received a formal notice in relation to the CVA, we suspect they did not and given the time frame we would wager the CVA was never a serious option, merely an excuse to further stall creditors. Its an excuse we hear about once a week, nine out of ten times its a complete fantasy.

As for court action well it is an option of course, but it is going to cost the OP money. Money they are unlikely to ever recover if the company is insolvent.

True they might get summary judgment, but it is much more likely they will enter the system and be waiting anything from 1-6 months to actually get judgment, depending on if the debtor dodges service or defends the action and the backlog at the court.

As for enforcing any judgment, yes you could pay for the sheriff to go in but does the debtor have physical assets worth £50K as that is what they will be looking for. If its a service business then the chances are they will not.

Some people have said to me in the past that I'm a bit aggressive in my accounts receivable but any credible client with a good AR team will be doing the same to their debtors who are slack in payment. If a company is struggling to pay its bills, it's far more likely to pay something to shut up an persistent creditor chasing their money than pay someone who's passively sitting back waiting for their money with the occasional polite chase.

Believe us when we say we completely agree with your view on your AR, but if the debtor company is actually insolvent there may well be very little the OP can do now to actually recover what is owed.

The problem is at the moment, nobody knows anything about the company in question so we are all in the dark. It makes it difficult to actually give any constructive advice. But this:

Two choices as I see it:
- Sit around doing nothing to formally chase the debt (as has happened for about a year) will result in getting nothing or maybe a few pennies from the corpse of a dead company.
- Be a bit proactive and you have a small chance of getting a far greater amount of the money back.

Is about the long and short of it. But with the caveat that throwing money at the recovery does not increase the chance of any recovery.

Edit to add: OP have you purchased a credit report on this company recently? That would certainly answer a few of your questions and you may well find the company has a growing list of CCJs already...

[Andy Hallett]

Reading through there are a lot of unknowns.

FWIW, You must establish the current status of the company, this is a matter of fact.

If not in administration follow the normal colection of debt procedure and assuming there is not dispute issue a Stat Demand followed by a Winder - You may find that another creditor has already done this

If in administration Register your proof of debt with the relevant IP

Either way it doesn't look good.

[Scratch It]

I didnt finish my sentence!, if allowed feel free to pm, can do a little digging.

[Scratch It]

An insolvency comes in many forms. Dont confuse a creditors voluntary arrangement and administration. They are completely separate legal arrangements. CVAs are primarly used so that a business can continue trading under the same ltd company. An administration is primarily used as a tool where the director of the old company closes company A at 11:00 and starat company B at 11:01. The assets are purchased by newco and old cos liabilities die with it (unless the debt is against the director, not the limited company)

Few companies go down the CVA route, and many many do fail, and are eventually issued with a winding up petition. A cumpulsary winding up order is a seperate legal entity again where the company is closed at the order of the court. The last of insolvency is a company voluntary liquidation where any assets in the companies name are liquidated and cash generated used to pay the insolvency practices fees and creditors (yes, in that order).

It largely depends on his asset value as to what route will work best for you - though do bear in mind that his Insolvency Practitioner will likely be working out the best solution for the director (and could be receiving excellent advice on how to ensure you dont get paid). That being said, if the company is asset rich and hasnt transferred the assets to his,his wives,his dogs name outside of the last free years, you may be fine. If it isnt, then a CVA is the only really feasible way for you to see a return. Is the company asset rich? It doesnt sound like he has your best interest at heart. what exactly did you sign?

You can take action, you can issue a CCJ against the company, and even potentially place a winding up petition against the company. CCJs are an excellent tool - they are in the public domain, and for that reason are avoided like the plague to avoid embarrassment and will have a large bearing on his credit worthiness severely limiting his options should he wish to refinance the company etc.

Im not sure if your able to pm on here, though

[craig1]

Wait a second.

The client last paid an invoice in October 2012, but you continued to provide services until April 2013? That is a very, very long time to be working for free.

The bottom line is this, if ClientCo doesn't have enough money to pay creditors they are insolvent and it's only a matter of time until they fall, or are pushed, into formal insolvency.

If that happens, you should get contacted by the Insolvency Practitioner. It's worth filling out the claim forms but you will be lucky to get 1p in every £1 owed in our experience...

Its probably not worth issuing legal proceedings at this stage, as you are likely to just be increasing your loss. The time for court action was in January 2013, not twelve months after receiving the last payment.

Unless you happen to have some kind of personal guarantee from the directors or shareholders the likelihood of recovering any funds now is negligible.

The thing is though that it looks like the directors are continuing to seek ways out of their situation, you don't look for CVAs unless you have some hope of turning your business around. The OP has two choices, wait with the rest of the creditors for an unforeseen amount of time until they finally go bang, and they will if HMRC refuse to play ball with the CVA, or try to get ahead of the queue by suing, aiming for summary judgement and getting the bailiffs in to get goods before the company finally falls over. Might sound sharp but I'd be going for any avenue possible to get my money, £25,000 in the hole means the costs of a DIY lawsuit are trivial in comparison

Also, a court judgement followed by any sort of intervention by either an administrator or the company just falling over would mean it's far easier to reconcile a £25,000 loss against this year's accounts rather than having to wait until the administrator makes a formal dividend offer against the final assets in maybe a year's time or so.

Two choices as I see it:
- Sit around doing nothing to formally chase the debt (as has happened for about a year) will result in getting nothing or maybe a few pennies from the corpse of a dead company.
- Be a bit proactive and you have a small chance of getting a far greater amount of the money back.

Some people have said to me in the past that I'm a bit aggressive in my accounts receivable but any credible client with a good AR team will be doing the same to their debtors who are slack in payment. If a company is struggling to pay its bills, it's far more likely to pay something to shut up an persistent creditor chasing their money than pay someone who's passively sitting back waiting for their money with the occasional polite chase.

[Safe Collections]

Wait a second.

The client last paid an invoice in October 2012, but you continued to provide services until April 2013? That is a very, very long time to be working for free.

The bottom line is this, if ClientCo doesn't have enough money to pay creditors they are insolvent and it's only a matter of time until they fall, or are pushed, into formal insolvency.

If that happens, you should get contacted by the Insolvency Practitioner. It's worth filling out the claim forms but you will be lucky to get 1p in every £1 owed in our experience...

Its probably not worth issuing legal proceedings at this stage, as you are likely to just be increasing your loss. The time for court action was in January 2013, not twelve months after receiving the last payment.

Unless you happen to have some kind of personal guarantee from the directors or shareholders the likelihood of recovering any funds now is negligible.

[Craig at Nixon Williams]

Thank you Craig, you have been a great help.
You are correct. The company as yet are not in administration or winding up.
So I presume I need to contact the Insolvency Practitioner to be listed as a creditor? Does this have to be done before he goes bump?

From your first post it sounds like you should already have been listed as a creditor if you had to agree to the CVA - was your agreement to the CVA communicated to the IP of the client? If you agreed with the client then I would now contact the IP and make sure that you are listed as a creditor - and if not, get yourself listed.

If it's going to go to the next step (administration or winding up) then you need to have your name on that list as soon as possible - again it will be the IP that you need to liaise with on this.

Craig

[jmo21]

But according to



there was no CVA, as not all creditors agreed to it.

he's ****ed then!

[NickFitz]

ok got it.

Please bare in mind that creditors on a CVA will get some percentage of what they are owed should the CVA be agreed and the company exit administration.

Sounds like he is trying to pull a fast one on you. He may have promised to pay you, but I think you would lose any rights if you are not on the CVA

But according to

He told me the client didn't get the agreement of the Inland Revenue and 1 other creditor. The assumption is the company is going bump.

there was no CVA, as not all creditors agreed to it.

[slowjoe]

I've not heard anything "official" about the CVA as yet and expected that someone, somewhere would have to take their "cut".
But hearing that redundancies will be happening this week got me nervous, so I thought I'd check what my options are.

As has been said HMRC have refused his request, so logially it's only a matter of time before he goes.
His promises I have long since disregarded. He "promised" to first pay at the end of January, February...

[jmo21]

ok got it.

Please bare in mind that creditors on a CVA will get some percentage of what they are owed should the CVA be agreed and the company exit administration.

Sounds like he is trying to pull a fast one on you. He may have promised to pay you, but I think you would lose any rights if you are not on the CVA

[northernladuk]

Ok, I'll do that next then.
There definately haven't been any creditors meetings.
I honestly don't expect to get anything, but I'll have a go!
Thanks again.

No harm in trying. An ever so slight sliver lining to this is that if you do give it a go you have demonstrated financial risk and chasing of a commercial debt. Something only a company can do don't have to worry about IR35.... As I say, not much of an outcome for you but hopefully might lessen the kick in the nuts you appear to have been dealt.

[slowjoe]

Ok, I'll do that next then.
There definately haven't been any creditors meetings.
I honestly don't expect to get anything, but I'll have a go!
Thanks again.

[craig1]

The quick answer is get the law suit in today for the money. Get whatever you can to get the court judgement. You don't need a solicitor to do this. If you time it properly then you can get a judgement and your bailiffs in there quickly to secure goods before he formally goes bust as a company. The most likely outcome is that you get nothing though, be prepared for that one.

From your post, it looks like he wanted to do a CVA but HMRC said they wouldn't go for it so he didn't bother going down the path of having to fork out the advance fees to just have a pointless creditors' meeting.

[slowjoe]

From what the OP has said, the client wasn't actually in administration when he said that. Administration is the next step (or straight winding up), it is now that he needs to make sure that he is listed as a creditor.

Craig

Thank you Craig, you have been a great help.
You are correct. The company as yet are not in administration or winding up.
So I presume I need to contact the Insolvency Practitioner to be listed as a creditor? Does this have to be done before he goes bump?