Reply to: None Paying Client

[BooBoo]

Thanks for all the advice and replies everyone.

Few new developments.. um.. developing. I'll drop back in a few weeks and let you know what happened!

[Safe Collections]

A winding up order is only really appropriate if you believe the company is insolvent.

Winding up a company or even threatening it using a statutory demand, can carry significant financial risks for the creditor if not done correctly. It is not a magic bullet and is generally the last resort as far as debt recovery goes.

In addition the cost is a minimum of £2k or thereabouts and if the debtor company has negligible assets all you are doing is increasing your loss when/if the company is formally declared insolvent.

True if the Software co want to continue trading with that specific company structure it may force their hand, but given how easy it is to dump Company A and continue trading with Company B the same day we wouldn't like to bet on it...

Our suggestion would be down tools as the OP has done and start chasing payment using the usual means. If the Software co want/need them back then that is the ideal situation to push for an immediate payment to reduce the current risk, coupled with pro-forma payments for any new work.

We certainly would not recommend you give this company a further 12 months credit to pay off the existing liabilities. By the same token we would not recommend allowing them any further credit at all, hence why any new work would need to be paid for in advance.

Alternatively if the debtor can't/wont play ball the OP could look at getting a personal guarantee from the directors of the company. If they are prepared to give these guarantees that shows a firm level of commitment and also gives a further avenue to recoup any funds.

But please note generally a guarantee would need to be drawn up by a solicitor, an email from the MD saying they personally guarantee payment will not suffice in court.

[ASB]

And you'll get nothing. You'll also get nothing if the client goes bankrupt, and more than likely if you try to sue. Probably the only way you'll see any money is if you finish the project and they turn out to be good to their word, but that's a bit of a leap of faith.

As I said: "This is only really appropriate when you believe the company is insolvent."

A winding up order is only really appropriate if you believe the company is insolvent. If they are insolvent then they may or may not be able to restructure in some way, and potentially come to agreement with the various creditors. But taking that leap of faith is an equally high risk strategy. **

Involving the client could also be hugely risky. Defamation being potentially one issue (get one thing a bit factually incorrect and it could be a whole world of legal pain). If the end client dropped the project there could be all sorts of interesting liability issues.

** Often its the only practical alternative, but doing things to focus their mind can help. They seem to be a bit reticent in agreeing the payment plan, getting confirmation of liability and then filling out and dating a petition this help. Sending this with the final attempt to the directors along the line of "Given your refusal to agree any meaningful payment plan it would appear you are probably insolvent, we will therefore be filing the enclosed petition with the court in 14 days". [By agreeing to pay over 12 months they can probably not contend liability].

[BooBoo]

Thats what I was thinking.. at least right now there may be a chance of recovering something even if they make it through a few months (Although, I think ill push to reduce the term) Ill have to await this formal payment plan for a bit longer I guess.. stopping work should speed that up!

If Inform the end client of the goings on I suspect they might drop them.. that could put me in a bit of legal hot water perhaps too so ill put that on the backburner for now

Thanks for advice so far

[VectraMan]

1) Statutory demand
2) Winding up petition

This is only really appropriate when you believe the company is insolvent.

And you'll get nothing. You'll also get nothing if the client goes bankrupt, and more than likely if you try to sue. Probably the only way you'll see any money is if you finish the project and they turn out to be good to their word, but that's a bit of a leap of faith.

[ASB]

1) Statutory demand
2) Winding up petition

This is only really appropriate when you believe the company is insolvent.

Winding up petitions: the sharpest debt recovery tool in the box? | The In-House Lawyer

[TheCyclingProgrammer]

I just got the credit check back. Not good, at all.. Based on the scoring by the company I used, its a 2/100 score!

Then my completely unqualified (IANAA, IANAL etc.) advice would be to suspend all activity until payment has been received and then consider terminating the contract. If you have other work (and more in the pipeline) then why expose yourself to unnecessary credit risk?

I'd also outright reject their payment plan offer but perhaps it might be a good time to start looking into your legal options.

[BooBoo]

You might want to check your contract and see what it says about 'entering into arrangements' and acts of bankruptcy or administration.

I know there's a handful of contractors in the same situation.

The 'Contract' isn't very detailed, more like a letter of engagement crossed with a NDA.. Seen a few of these lately, I think it must be a template somewhere.

Although it does say they will get rid of me If I become bankrupt!


I just got the credit check back. Not good, at all.. Based on the scoring by the company I used, its a 2/100 score!

[BooBoo]

12 months is a lot of credit to extend to somebody who doesn't sound very credit-worthy.

If I thought it would increase the chance of me getting paid, I'd *possibly* consider a 3 month payment plan at most. 12 months is taking the piss. Have you credit checked your client?

That's a good point actually, I didn't really see it like that (As in, providing credit) I've just sent off for a credit check on them.

Its above the small claims limit.

Did anyone have any advice on whether I should terminate the contract formally (Or at least formally agree its been breached) before I break a few rules in it myself (Stop Work etc)

[TheCyclingProgrammer]

Thanks Again, Have stopped work today.

They say they are obtaining finance to resolve.. but want me to agree to a 12 month payment plan for the outstanding invoices.. doesnt seem to add up.. if they got finance surely they wouldnt need the 12 months!

12 months is a lot of credit to extend to somebody who doesn't sound very credit-worthy.

If I thought it would increase the chance of me getting paid, I'd *possibly* consider a 3 month payment plan at most. 12 months is taking the piss. Have you credit checked your client?

If you feel its just a delaying tactic, then I'd reject the proposal outright and insist you are paid what you are owed by X date and start charging them interest after that. Is the amount owed under the threshold for small claims?

[tractor]

...

Thanks Again, Have stopped work today.

They say they are obtaining finance to resolve.. but want me to agree to a 12 month payment plan for the outstanding invoices.. doesnt seem to add up.. if they got finance surely they wouldnt need the 12 months!

Depends how much they owe to other organisations and what your priority is over theirs. If you are way down the pecking order, you will get shafted before the rest. You might want to check your contract and see what it says about 'entering into arrangements' and acts of bankruptcy or administration.

[BooBoo]

Thanks Again, Have stopped work today.

They say they are obtaining finance to resolve.. but want me to agree to a 12 month payment plan for the outstanding invoices.. doesnt seem to add up.. if they got finance surely they wouldnt need the 12 months!

[SueEllen]

Its a remote contract and have plenty of other things on. Have been having auto reminders going out too.. maybe need to make them a little less polite soon!

End client has no idea software company is having issues.. nor that they are basically staffed by contractors.. although im sure they must be wondering why productivity has dropped by 99%! My worry about approaching end client therefore is confidentiality. But I suspect they have not paid any final payments so will still be in need of software and have remaining budget!

Recruiter also doesnt seem to be interested in getting involved

Stop work and start chasing.

First chase your client make it clear you will start work again when paid. Only if they still don't pay you and it's debt collector bound contact their client and apologise for not doing the product and explain why.

[BooBoo]

Its a remote contract and have plenty of other things on. Have been having auto reminders going out too.. maybe need to make them a little less polite soon!

End client has no idea software company is having issues.. nor that they are basically staffed by contractors.. although im sure they must be wondering why productivity has dropped by 99%! My worry about approaching end client therefore is confidentiality. But I suspect they have not paid any final payments so will still be in need of software and have remaining budget!

Recruiter also doesnt seem to be interested in getting involved

[borderreiver]

Well, if you want to work for free, that's your business. As you have tried negotiation with your client, I would argue that the time for discussion is over. What you should be doing is:

1. Stop work immediately
2. Start the dunning process (lots of threads on this on this site)
3. Look for another gig.

You are not in breach of contract (presumably - unless your contract is very weird!!). Your client is.