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COVID Cashflow - Time is of the Essence

In these uncertain and unprecedented times, the importance of protecting your business has never been greater. With social distancing slowing down production and trade, we are all having to think more creatively to adapt and ensure the personal safety of our families, colleagues and employees.

The reality is that this adjustment is going to undoubtedly affect the cashflow of most, if not all, businesses. This means that both recovering and paying debts is going to be more difficult, but doing both will be essential for survival. 

Despite the ongoing disruption, MBM’s Dispute Resolution team remain committed to helping you defend and pursue all types of debt actions. To get ahead of the curve, here are some top tips for protecting your business through this crisis:

Caveats

Having Caveats in place in the courts is one of the most effective protective measures to insulate your business in financial difficulty. 

Caveats are documents which provide a measure of protection against applications for interim interdict (i.e. injunction) or attempts to seek the appointment of an interim liquidator or administrator to the company without notice first being given to your solicitors.  In circumstances where such an application is made, your solicitors are automatically notified by the court and given an opportunity to make representations on your behalf before the Judge or Sheriff decides the application.Without caveats, the courts could grant orders without your knowledge which detrimentally affect the businesses, such as appointing a liquidator who takes control of the company’s assets, meaning all trade would have to cease while the application is determined. 

Defending enforcement

If your debts are unpaid and overdue, you may receive a demand letter or Statutory Demand from the creditor. A Statutory Demand is a demand for payment within 21 days; otherwise, unless the debt is disputed, a winding-up petition can be raised against the company. 

If this happens, it is important you take action as soon as possible. If the debt is disputed, the creditor must be made aware of the reasons why right away, as this will usually prevent them from raising a winding-up petition. If the debt is not disputed, it must be paid within 3 weeks of receipt of the Statutory Demand, or, if agreed, a longer, negotiated period during which the creditor agrees not to take further action. We can help with this.

If you are served with a winding-up petition, it is equally important that you act quickly and instruct solicitors immediately to advise you on defending the action. Failure to do so could result in the court granting undefended orders for winding up if you are too late. 

Creditors may also resolve to raise a claim in the courts and seek interim orders against your company. They could attempt to freeze the companys bank accounts, stop the company from disposing of property or even lock down some of its stock. It is, therefore, imperative that if a demand letter is received, a proactive approach is taken and solicitors employed to stave off creditors attempts to put such orders in place.

Debt Recovery

Recovering unpaid invoices is just as important to make sure your key suppliers and staff can be paid. We can help by taking steps such as sending a legal letter which demands payment within 7 days; otherwise further enforcement action will be taken. Further action could include, among other things, a Statutory Demand, which means that is the debt is not paid or disputed within 21 days, or an appropriate payment plan agreed, a winding-up petition can be raised against the debtor. Failure to pay or dispute a statutory demand shows that the debtor is unable to pay their debts as they fall due. Therefore, if necessary and appropriate, you can then apply to the court for the debtor to be wound up. Alternatively, if the debtor disputes that payment is due, a civil court action could be raised against them for payment. These steps can be vital triggers for payment, especially in a climate where lengthy and costly disputes are far from ideal. 

We can also take immediate action on your behalf if you think that a debtor might be trying to dispose of assets to a new comapny in order to avoid paying their debts. We can freeze their bank accounts and stop them from selling property.

Our team of expert laywers are reactive and cost-friendly. Or goal is to keep every recovery action proportionate and efficient to ensure that you can recover the most amount of money.

If you need any help to recover debt, or keep creditors at bay, contact our Dispute Resolution team on 0131 226 8200 or DisputeResolution@mbmcommercial.co.uk.

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