Access to the UK Business Market

With a Corporate Department in Hertford (20 miles north of London) Breeze & Wyles Solicitors LLP is well placed to support any business looking to create a market share in the UK as a springboard to the larger prize of the European Business market.
However there are a number of things that you should consider before taking that leap. In the first of a number of blogs on this issue I discuss two of those items below.
Build Relationships with local business support networks
Entering a new market is like starting a new business. Before commencing operations any business owner will look to do a through investigation of the local market. Information such as employee rights, commercial property law, licensing and regulatory rules and corporate governance are key to your success. The starting point may be UK Trade and Investment or the British Chamber of Commerce as the source of this information. Breeze & Wyles Solicitors LLP is a Patron Member of Hertfordshire Chamber of Commerce and can draw on all of the relevant information necessary for any client looking to enter this market and provide introductions to professionals in any area that a new market entrant may require.
Globalisation does not mean harmonisation. Each country will have different laws in relation to types of business operations. You should understand these anomalies before you consider entering that market.
Get a personal view of the market
Come and see the location for yourself. Many business owners work on gut instinct. Come and meet our team and other professionals whose advice may be necessary to your deliberations and review the way that your operation is likely to work in the UK as this is sure to be different from the way the remainder of your business works.
As the UKTI says:
“Why the UK?
Rich and diverse market
The UK is a rich and diverse market ranging from Pharmaceuticals, Fashion and Advanced Manufacturing through to primary food production and including world leading businesses in Space Technologies Aerospace and Automotive engineering. Whatever market sector you operate in you will find the UK an attractive location with customers, product innovators, suppliers and partners easily accessible.
Creative and innovative
Every business needs good ideas and the UK is one of the most prolific sources of imaginative solutions and creative thinking in the world. From research in academia through companies innovating in new products to design for the high street and digital creativity for the games industry, the UK has an outstanding record of achievement.
UK labour market
The UK’s labour market is one of the worlds’ most flexible. This factor combined with its strong skills base in the UK is reflected in its excellent record of attracting major foreign investors from all over the world.”
If you have an interest in entering the UK Business Market contact Brendan O’Brien on brendan.obrien@breezeandwyles.co.uk or on 00 44 1992 558411


Employment Law Newsletter January 2013

Dear Employer
A belated Happy New Year! Made any resolutions yet? You will be reading this newsletter on line via the internet: you may even be one of the lucky ones already to have a 4G phone. The seemingly relentless pace of technological change is presenting real challenges for employers; the impact of social media on the employment relationship is creating issues with which many employers are not sure how to deal. Resolve to make 2013 the year when you tighten up your contracts and workplace policies and increase your ability to limit the damage that your employee could do to your business via social networking. More of this later in this letter.
We thank you for joining us for another year.
Meanwhile, if you have any particular employment issues, please do not hesitate to contact us: details are at the end of this letter. If you have any comments or suggestions on this newsletter, please email newsletter@breezeandwyles.co.uk
Kind regards
The Employment Law Team
Some Recent Cases in Employment Law
Facebook and the employer
Employment Tribunal cases involving disputes surrounding the employee’s use of social media are becoming increasingly frequent. In a recent case, Mr Smith posted a comment on his Facebook page about his views on gay marriage in church. His Facebook page was visible to his “friends” who included work colleagues, some of whom were upset by his comments. The identity of his employer was also visible on the page. He was disciplined for gross misconduct under his employer’s disciplinary policy which included a requirement not to engage in “activities which may bring the Trust into disrepute, either at work or outside work”: the Trust had an Equal Opportunities policy which it considered Mr Smith had breached by his remarks and included an express reference to “any web-based media such as a personal blog, Facebook, U-Tube or other such sites.” The result was that he was demoted from his position and given a final warning. Mr Smith brought a claim for damages alleging breach of his employment contract. He won. The Judge considered that Mr Smith’s Facebook wall was inherently non-work related because, while identifying himself as a Manager at the Trust, he clearly used it for the expression of personal views about matters which had nothing to do with his work. His Facebook was an aspect of his social life outside work and in the same way that a pub etc might have been. Also, although it was not purely private, in that there was a “friends of friends” extension, it was not a medium by which he could or did thrust his views upon his work colleagues, i.e. he had not emailed all their individual addresses. Also, it was his colleagues’ choice, rather than his, to become his friends, and it was mere chance their having become aware of him at work that led them to do so. He was in principle, free to express his religious and political views on his Facebook, provided he acted lawfully, and it was for the recipients to choose whether or not to receive them. The Judge concluded that the prohibition on the promotion of political and religious views in the Trust’s Code of Conduct did not extend to Mr Smith’s Facebook wall and in any event, the posting did not amount to promotion of his views. His Facebook did not have the necessary work-related context to attract that provision of the Trust’s Code of Conduct.
The judgment also made it clear that if an employee is liable to be demoted and have his salary substantially reduced as a result, he must be entitled to ascertain from the codes and policies to which he is subjected what he is and not permitted to do, and to understand the extent to which those obligations extend beyond the workplace and into his personal or social life. This judgment is important because it touches on the difficulty of identifying where the work life ends and the social/private life begins. See “The Employer Traps and Other Tips”. [Smith v Trafford Housing Trust 2012]
Restricting employees after termination
The prudent employer will put restrictive covenants into the employment contract. These can include preventing the employee soliciting business from the ex-employer’s clients after the employee leaves. Case law on the meaning of “solicitation” includes the following:
• “To ask”, “to call for”, “to make a request”, “to petition”, “to persuade” [Sweeney v Astle]
• To contact former clients with the intent of enticing them away [Austin Knight (UK) Ltd v Hinds]. The word “entice” has been described by the Court as to “tempt, lure, persuade, inveigle” [Hydra PLC v Anastasi]
It has also been held that it does not matter who initiates the contact; there is solicitation of a client by a former employee if the former employee in substance conveys a message that he or she is willing to deal with a client and, by whatever means, encourages the client to do so.
It seems clear that there must be at least an approach followed by some sort of encouragement by the ex-employee for solicitation to have taken place.
In the case of Taylor Stuart & Co v Croft the Court held it was acceptable for an employee to provide his contact details (including address) when informing clients of his departure from his ex-employer but it was not acceptable for him to state that he could be contacted at that address. This shows that the encouragement to do business need not be an express one and also demonstrates how thin the line between legitimate activity and unlawful contact can be.
A Christian working on Sundays : not discrimination
The Employment Appeal Tribunal has upheld an Employment Tribunal’s decision that a requirement for all full-time staff to work on Sundays in rotation did not indirectly discriminate against a Christian. The claimant, a Christian, was employed as a children’s care worker and was required to work on Sundays. For two years, her employer accommodated her wish not to work on Sundays due to her Christian beliefs. However, her employer then required her to work as contractually obliged. She refused to do so. She was disciplined and resigned, claiming that making her work on Sundays amounted to indirect discrimination against Christians. The Tribunal found that the employer’s aim of e.g. ensuring an appropriate gender balance on each shift, an appropriate seniority mix etc was legitimate, and that the requirement was a proportionate means of achieving that aim. When she appealed, the EAT dismissed it. [MBA v London Borough of Merton]
What’s in the pipeline
Increase in compensation limits
From 1st February 2013, new rates of compensation will apply as follows:
• Limit on the amount of a week’s pay for the purposes of calculating statutory redundancy payments and basic award for unfair dismissal (amongst other things) will increase from £430 to £450
• The maximum compensatory award for unfair dismissal increases from £72,300 to £74,200
• Guarantee pay increases from £23.50 a day to £24.20
• The minimum basic award in cases where the dismissal was unfair because of health and safety, employee representative and the other statutory reasons will increase from £5300 to £5500
The new rates apply when the event giving rise to the compensation or payment occurs on or after 1st February, for example in unfair dismissal, the rates will apply to all dismissals where the effective date of termination falls on or after this date. Where the dismissal or relevant event falls before 1st February, the old limits will still apply, irrespective of the date on which compensation is awarded.
The Employer Traps and Other Tips
Using social media
The Smith case earlier in this letter emphasizes at least three things:
• Limits on an employer’s ability to police the behaviour of individuals outside the workplace;
• The difficulty in identifying the point at which the work context ends and the personal life begins;
• The need for a proper analysis of whether the behaviour of which you as the employer complains actually comes within the scope of any policy relating to social media
If you as an employer do not have any social media policy in place, or one that is not fit for purpose, then it is going to be extremely difficult to show that an employee was doing something wrong. Difficulties can particularly arise if it is part of your employees’ duties to use social media for work-related purposes (e.g. to write a blog), in which case you should make it clear at the outset that the account and content belongs to the employer and that any accounts (e.g. Twitter) used during employment should not be used after termination.
If you require any advice on the above, please do not hesitate to contact us.
NOTE – WE ARE HOSTING A SEMINAR IN APRIL 2013 ON THIS SUBJECT

FURTHER DETAILS TO BE ANNOUNCED

Charging Orders: OFT will take action if use is unfair or oppressive!

A charging Order is a court order that turns unpaid and unsecured judgments debts into secured debts. This means that once prior charges have been paid the debt secured by the Charging Order must be paid from the available proceeds of sale before the remaining funds are distributed to the owners. Although rare, the creditor can also apply to court to have the property sold so as to be paid the sums owed.

In November 2010, the OFT criticised four lending institutions for their use of Charging Orders saying that:  "there was failure to consider the customer's cricumstances or proportionality before asking the court to put a charging order in place"

This month  the OFT has had to impose requirements on two other lending institutions about the way that some customers debts are being enforced by Charging Orders. Whilst saying that Charging Orders are a legitimate way to secure liability and recoup debts there remain concerns about the way that they are used.In some case their use can be unfair and oppressive and in those circumstances the OFT says that it will take action to protect consumers.

In order to comply with the requirements each lender should follow procedures for each customer as follows:

•the extent to which a customer engages with them to try and agree repayment plans and the extent to which payments are made under that plan,

•the personal and financial circumstances of the customer (included enquiring of the position through the customer’s representatives where relevant),

•the amount of the sum owed (the OFT query the use of charging orders where the debt is less than £5,000),

•the length of time the debt has been owed, and

•whether it is reasonable to take alternative steps to recover the sum due.

For more information contact Brendan O'Brien on 01992 558411 or at brendan.obrien@breezeandwyles.co.uk


Breeze & Wyles announces that Solicitor has acquired STEP qualification

Breeze & Wyles Solicitors LLP is pleased to announce that one of its solicitors, Hardeep Nijher, has been confirmed as a member of STEP. This means that the firm can demonstrate greater depth in handling Wills, Trusts and Estate Planning.

Brendan O'Brien, Marketing Director of the firm congratulated Hardeep: "It takes a lot of hard work to acquire this award and the recognition particularly when you are also working. Hardeep should be rightly proud of this achievement. For those who are confused as to what this qualification means I set out the benefits in the rest of this blog."

About STEP
The Society of Trust and Estate Practitioners (STEP) is the leading worldwide professional body for practitioners in the fields of trusts, estates and related issues. Full members of STEP are the most experienced and senior practitioners in the field of trusts and estates. STEP promotes the highest professional standards through education and training, leading to widely respected professional qualifications. STEP members are subject to a rigorous code of professional conduct and the public can identify if their advisor is a STEP member by the use of the designation TEP (Trust and Estate Practitioner) after their name. STEP aims to promote the highest professional standards through education and training and once fully qualified as a STEP member they are widely recognised and TEPs are highly valued by employers. I, Hardeep Nijher, have now successfully completed the STEP qualification and will be accredited with the TEP designation.
Members advise clients on the broad business of the management of personal finance. STEP members help families plan their long term financial future, facilitating good stewardship and financial planning across future generations. STEP members also help families comply with the often complex tax rules surrounding trusts, estates and inheritance. Members advise clients on the broad business of the management of personal finance.
STEP members are also subject to an extensive Code of Professional Conduct. Members are required to all times to act with integrity and in a manner that inspires the confidence, respect and trust of both clients and the wider community.
STEP members spend their professional lives working with real families tackling real problems. Common issues for STEP members to advise on are:
• providing for a husband or wife after a death while protecting the interests of any children
• ensuring that a family business will pass safely from one generation to another
• care and support for elderly or vulnerable relatives
• ensuring that families with interests and family members spread across differing countries are compliant with the laws and tax rules of many different jurisdictions
• helping donors support philanthropic causes in an effective way.
STEP takes a leading role in communicating the practical viewpoint and expertise of members to governments, tax authorities, regulators and the public around the world. STEP has consistently campaigned for fair, transparent and consistent tax rules. Families making long-term plans need clear tax rules that do not change repeatedly if they are going to have the confidence to enter into long-term commitments.
STEP was founded with the aim of bringing together all the practitioners in the field and cutting across old established professional boundaries. STEP is established for the following objects relating to those working in the field of trusts and estates:
The Aims of the Society are:
1. To provide a forum for individuals drawn from the legal, accountancy, corporate trust and other professions whose occupation includes a significant involvement, at specialist level, with any of the planning, creation, management of and accounting for, trusts and estates, executorship administration and related taxes.
2. To promote discussion of aspects of tax, accounting, administration, statute and case law which are of general concern.
3. To advance knowledge and learning in respect of trust, estates and allied subjects, to encourage and promote the study of trusts and estate practice, and to educate members of the public including practitioners.
4. To organise and hold conferences, meetings and assemblies to provide a forum for the discussion and dissemination of relevant information and data to promote a better understanding of the practical aspects of the foregoing.
5. To undertake research and make suggestions and representations of a technical (strictly non-political) nature to governmental and other persuasive bodies to promote a better understanding of the foregoing and to improve the law relating to and practice of trusts and estates.
6. To maintain requisite standards for practitioners by way of education and training; and to organise and hold appropriate examinations and issue qualifications.
STEP’s mission is to:
1. Be the worldwide professional body of practitioners advising on both the responsible stewardship and structuring of assets by individuals, families and businesses today and across the generations and the structuring of those assets to care for dependants and the vulnerable.
2. Promote the highest standards through education.
3. Demonstrate the value of good stewardship and planning across future generations to governments, professionals, financial institutions and the public.
4. Be the representative voice of the industry, as a unique professional body providing a local, national and international learning and business network for its members
If you wish to use this service please contact Hardeep on 01992 642333 or hardeep.nijher@breezeandwyles.co.uk


Debt Recovery: Fact Sheet 7 Are you spending good money to chase bad?

It is a fact that there is little point chasing a “man of straw”. The difficulty is not normally accepting this as a fact but identifying whether a particular debtor is indeed a man or company of straw.
There are steps you can take to help make your assessment before incurring the costs associated with issuing County Court proceedings:
 Make enquiries with staff that have been out to your debtor’s premises to identify possible assets that the debtor may have. What assets were at the premises? Stock? Computer Equipment? Vehicles? Machinery? If there are assets of value at the premises, once a County Court Judgment (“CCJ”) is obtained, you can instruct a High Court Enforcement Officer to repossess these assets which will then be sold and the money paid to you in settlement of the debt.
 Make pre-litigation enquiries regarding the debtor. How? We can help you with this:
Run a financial “health check” on your debtor
We charge £10.00 plus VAT for this search and report. This search is extremely cost effective when considering the potential wasted costs for pursuing a debtor that is a man / company of straw.
The report, which will be sent to you, will look at:
 The debtor’s “health rating”; whether the debtor is considered to be “high risk” in terms of their financial position.
 Whether there are any CCJ’s against the debtor and whether these have been paid.
 The debtor’s last filed accounts including balance sheet (and any assets identified on the same) / profit and loss accounts / cashflow and turnover (where such information has been filed with Companies House).
 Whether any petitions have been filed for the winding up of the debtor.
 The debtor’s trading address.
 The details of the debtor’s directors and shareholders (if a Limited Company).
The report will enable you to identify a) whether it is financially worth pursuing the debtor at all; and b) what the best enforcement method will be to increase your chances of a successful recovery (e.g. an application for a Charge over your debtor’s property).
If your initial investigations lead you to believe that your debtor is not a company or man of straw, it is important to ensure that it is cost effective to pursue your debtor and that any legal fees you incur are proportionate to the debt owed.
Breeze and Wyles offer a low cost debt recovery service with our fees for chasing your debtor starting at £2.00 plus VAT for a Letter Before Action and depending on the amount of the debt, between £65.00 plus VAT and £170.00 plus VAT for issuing proceedings. Our fees are fixed allowing you the comfort of knowing the true cost of pursuing your debtor through the Courts.
If you would like further information regarding our debt recovery service, please contact our Rita Wright at rita.wright@breezeandwyles.co.uk or 01992 558411.
© Breeze & Wyles LLP 2013


Debt Recovery: Fact Sheet 6; Simple steps to improve your account opening process – but will this help your internal credit control?

Many difficulties faced by businesses in their credit control procedure stem from defects in the initial account opening process. Where a business grows, it might be that the account opening process is not updated to reflect problems that are experienced by the credit controller when chasing debts. Below are some simple steps that might improve your account opening process and which will assist you should your customer fail to pay its invoice on time!
Account Opening Process
 Regardless of whether your business supplies goods or services and regardless of whether orders are placed in person, by phone, by email or online, you should have a standard set of questions that need to be answered by your customers before you open an account. Unless you take full payment from your customer upfront, you will be offering your client credit on the goods / services that you are to supply.
 You should ensure that you use a standard account opening form, which could be in a paper or electronic format. Examples of the information that you should take from your customer, to make life easier when addressing credit control, include;
o The full name of the business that will be liable for payment
This might sound obvious, but examples of difficulties that can occur include;
a) Where your customer trades through a different name to the actual business that sits behind. For example, if your client is a restaurant, pub or theatre (e.g. The Coopers), it might be that the name of the business that runs The Coopers, is Coopers ABC Limited. If the restaurant or pub fails to make payment, you would need to sue Coopers ABC Limited and therefore, if you do not know the name of the business behind the restaurant or pub, you will find it very difficult to issue proceedings in respect of an unpaid invoice.
b) Where your customer just gives its trading name but fails to indicate whether it is a Limited Company. For example, if your customer tells you its name is ABC, you should check if the Company is in fact ABC Limited. Limited Companies are a separate legal entity and therefore, if you issued proceedings against ABC when in fact, the customer is ABC Limited, the claim may well be struck out.
o The trading status of your customer
You should always ask whether your customer is a Limited Company, Limited Liability Partnership, Partnership or Sole Trader. Without this information, you will not know which legal entity to issue proceedings against, should your invoice be unpaid. This may mean that you are forced to write off valid debts purely because of lack of information.
o The address for delivery of goods / services
o The address for the Payee / Customer
This address might be different to the address for delivery of goods and services. Therefore, unless you take the address for the payee, you will send the invoice to the incorrect address and it might be that the Payee / Customer does not then receive the invoice.
o A contact name, in the accounts department, to whom your invoice should be sent.
Sending the invoice directly to the person who will arrange payment, will mean that there should not be any unnecessary delays in processing payment.
©Breeze & Wyles LLP 2013


Debt Recovery: Fact Sheet 5; Spotting the signs of Insolvency

There are steps you can take as a business, to “spot” the signs of insolvency. This is important for two reasons;
1. If you continue to supply goods or services to a business that you fear might be facing insolvency, it will allow you the opportunity to re-consider your terms of supply. For example, you might decide only to supply goods or services where you have received full payment on account;
2. If there are outstanding invoices, it might encourage you to be more proactive in your chasing of this debtor, or if you have real concerns that the customer is already insolvent, to undertake further investigations regarding their financial position before issuing Court proceedings.
What should you look out for?
1. You should regularly look at your client’s account and consider whether there are any anomalies on the same. Examples of anomalies that might be an example of a poor financial position might include;
a. The situation where your customer has ordered a greater volume of stock on credit however, is taking longer and longer to pay outstanding invoices?
b. The average number of days for payment of each invoice is becoming greater, without good reason;
c. There is a greater sum outstanding on the account, than is normally owed and this is without good reason;
d. Your customer has made one, or numerous requests for an extension of your credit facilities.
2. Where your sales staff are in regular contact with your customer, they are often the first to realise that “something might be wrong”. For example, staff of your customer might make passing comments regarding their business or finances, or your sales staff might become aware of redundancies and cost saving exercises being adopted by your customer. Whilst this might not be an indication of insolvency per se, this combined with other factors (e.g. an increase in the average number of days for payment of each invoice), might cause you to question their financial status.
3. If a Company has made promises to pay, but failed to adhere to the agreed payment terms, this may well be due to financial difficulties which could well lead to insolvency. In this scenario, and where you are continuing to supply goods or services, it would be wise to withdraw all credit facilities or to vary your current terms of trading – for example, by demanding a director’s personal guarantee in writing before you make a further supply.
4. If your customer has become difficult to contact suddenly, and this is without good reason, this might be a sign of difficulties – particularly where you are contacting your customer regarding unpaid invoices.
What should you do if you believe your customer is facing financial difficulties?
1. If your customer appears to be “juggling debts”, you will need to take a view regarding whether to a) simply wait to see if your debtor ends up paying you or b) take a more pro-active approach in an attempt to get “pushed to the front of the creditors queue”.
2. If you are minded to take a proactive approach, you will need to continue to apply pressure to your debtor by exhausting your internal credit control function in a timely manner and in the event that this does not result in payment, instruct Solicitors to pursue the debt promptly. By issuing proceedings and securing Judgment, you will have the option to enforce Judgment, for example by instructing High Court Enforcement Officers to repossess any assets that the customer has.
To find out more about our low cost debt recovery service, please do not hesitate to contact our Rita Wright on 01992 558411 or rita.wright@breezeandwyles.co.uk.
© Breeze & Wyles LLP 2013


Debt Recovery: Fact Sheet 4; Simple steps that you can take to improve your internal debt recovery rate.

DELIVERY OF AN INVOICE;
 Ensure that an invoice is delivered promptly and accurately and that the invoice states the customer’s full name. Make sure that you are able to clearly and correctly identify your client’s name and status – is your client a Limited Company? Partnership or Sole Trader? Include your customers full and correct name. Correct identification of your customer is imperative if you are to successfully decrease your average debtor days.
 Include on the invoice your customer’s reference number so that your customer is able to easily identify the invoice.
 Ensure that the invoice states clearly the payment terms and the date by which payment is to be made.
 Ensure that a copy of the invoice is retained.
 Ensure that the invoice goes directly to the person in the organisation who will be responsible for paying the bill. It is sensible to call and obtain this information from your customer, before sending the bill. This limits the risk of your invoice sitting on anothers desk for a few days or weeks, before finally making its way to the correct person.
 Ensure that your invoice clearly shows the manner in which payment can be made. Ensure that you offer the opportunity to pay by credit card / debit card or BACs and identify how these methods can be utilised by your payee. Payment by these methods is often the quickest and easiest method for your payee – the easier it is for your payee to pay your invoice, the quicker you will get paid.
CREDIT CONTROL
 Ensure that you have a proactive and efficient process for chasing unpaid debts, as soon as the payment term expires. The key here is to ensure that you receive reminders, through either your accounting package or outlook, as soon as an invoice becomes overdue. You can not chase your debts proactively if you do not know when an invoice has become overdue.
 Where the chasing of invoices is being done internally, automation is ideal because it will limit internal resources whilst ensuring that debts are still being chased. Use standard precedent letters and diarise weekly chasers to be made both by letter and telephone.
 Telephone calls are time consuming but often offer a higher rate of return. Make sure you stick to the timescales (If you tell a customer you want payment in 7 days and they don’t pay, chase again by letter or phone promptly on day 8).
 Decide how many letters and telephone calls you will undertake during your internal credit control process and what the course of action will be should payment not be made. We would suggest that instruction to us to send a letter before action to your debtor, at a cost of £2.00 plus VAT, should be the automatic next step following exhaustion of your internal credit control function. Our instruction is quick and easy and instructing us promptly will ensure that ongoing pressure is applied to your debtor. This will increase the likelihood of recovery.
 Make sure that staff with the appropriate skill set and personality are responsible for your credit control. There is little point having someone who is overtly shy and embarrassed, in charge of asking a customer for a commitment to pay by a certain date.
 Make sure that your credit controller is efficient and proactive and keeps records of each call made. When a debtor says that they will make payment, make sure that your credit controller asks them to commit to a date by which payment will be made. If your customer defaults, ensure that the customer is called again and ask for a revised payment date. If the customer defaults again, it is highly likely that further action is going to be required. Continued failure to meet agreed payment proposals may be a sign that your debtor is experiencing financial difficulty.
 To illustrate the importance of making a record of a telephone call with a debtor, you can take the example where in a telephone call a debtor admits liability, or tries to agree a payment plan. A telephone note recording admission may well help to question the credibility of a debtor who subsequently tries to deny liability for the debt.
 If you do agree an installment plan with a debtor, it is worth confirming the agreement in writing and making sure that when negotiating the agreement with the debtor, you reserve the right to claim the entirety of the invoice should the debtor default on the installment plan.
 Act quickly and don’t delay. Delay will breed further delay by your debtor. If you threaten Court action or referral to a Solicitor, follow through with the threat. Otherwise, the debtor may not take you seriously and prioritise paying other creditors that are pushing for payment.
 Categorise your debtors in to those who “Won’t pay” and those who “Can’t pay”. Where resources are limited, focus your internal resources on chasing those who “won’t pay”.
© Breeze & Wyles LLP 2013


Debt Recovery: Fact Sheet 3 – What can you do when you hear that a debtor is insolvent? What does this mean for you as creditor

More frequently, we are approached by clients who have “heard” that their debtor is insolvent. It might be that the business has heard this on the grapevine, or that they have heard informally from the debtor. Alternatively, a business might have received formal notification from an appointed insolvency practitioner.
Insolvency Jargon
There are a number of different types of corporate insolvency and a great deal of “jargon” which sometimes causes confusion for creditors. The most common phrases you will hear are “administration” and “liquidation”. This fact sheet focuses on these two areas of corporate insolvency.
Administration
If a business is in administration, it means that an administrator has been appointed to replace the directors for the purpose of “assessing” whether the Company can be rescued; whether the company or its assets should be sold; or whether the company should be wound up.
Whilst a Company is in administration, a moratorium exists which prevents creditors from pursuing a claim against the Company, without the authority of the Court or the administrator. The purpose of the moratorium is to protect the assets of the Company whilst the administrator is deciding whether the Company can be rescued or not. The moratorium lasts for the duration of the administration. The administration will come to an automatic end after 12 months unless the creditors, or Court, agree to a further extension of up to 6 months.
The administrator is an officer of the Court and as such, must act in the best interest of all creditors generally. Within 8 weeks of appointment, the administrator will make proposals to creditors, for achieving the purpose of administration. In the majority of cases, within 10 weeks of appointment, the administrator will also hold a meeting of the creditors. The purpose of the meeting is to enable the creditors the opportunity to vote in favour, or against, the administrator’s proposals.
What should you do if a debtor is placed in to administration?
Upon discovering that a debtor is in administration, you should ensure that the administrator is aware of the debt! It sounds obvious, but it is dangerous to assume that your debtor has recorded all unpaid invoices on its accounts package. Therefore, you should inform the administrator of the debt to ensure that you receive the administrator’s proposals and details of the creditors meeting.
If an administrator has been appointed, the appointment should be registered with Companies House. Therefore, if the debtor will not disclose details of the appointed administrator, you can find details of the administrator at Companies House.
Once you have proved your debt to the administrator, there is little else you can do pending conclusion of the administration. In reality, it is highly unlikely that unsecured creditors will receive any payment during the period of administration. If at the end of the administration, the administrator places the company in to liquidation, you might receive something towards the debt following the liquidator’s appointment. Whether you will receive a payment, and how much you receive, will however depend on whether there is any money “left in the pot” following payment to secured and preferential creditors.
You should of course take advice from your accountant regarding the impact on your accounting obligations, following the debtor’s administration.
Liquidation
A business may be wound up / placed in to liquidation, in one of three ways;
1. By a shareholder resolution (this should only happen where a Company is solvent); Members Voluntary Liquidation;
2. By creditors application to wind up a Company due to the Company’s inability to pay its debts; Creditors Voluntary Liquidation;
3. By Order of the Court; Compulsory Liquidation
The liquidator will take control of the Company’s assets and his / her primary duty is to realise assets and distribute to the creditors according to a specific order of priority.
In the case of a Compulsory Liquidation, the Official Receiver will be appointed to investigate the causes of the Company’s failure. The Official Receiver will call a Meeting of Creditors within 4 months from the date of the winding up order. At least 21 days notice of the meeting must be given to the Court and to all Creditors. The notices issued will inform the creditors of the date by which a proof of debt and proxy must be lodged, in order for the creditor to vote at the meeting.
Once the distribution to creditors has been completed, the Company will be dissolved.
What should you do if a debtor is placed in to liquidation?
Upon discovering that a debtor is in liquidation, you should ensure that the liquidator is aware of the debt! It sounds obvious, but it is dangerous to presume that your debtor has recorded all unpaid invoices on its accounts package. You will need to lodge a formal proof of debt with the Liquidator if you are to be able to vote at the creditors meeting and / or receive any distribution throughout the liquidation process.
If a liquidator has been appointed, the appointment should be registered with Companies House. Therefore, if the debtor will not disclose details of the liquidator, you can find details of the liquidator at Companies House.
Whether you will receive a payment, and how much you will receive, will depend on how much is left once the liquidator has paid out debts in accordance with the statutory order of priority.
You should of course take advice from your accountant regarding the impact on your accounting obligations, following the debtor’s administration.
Avoiding Insolvency
Whilst you will not completely avoid the risk of an insolvent debtor, you substantially increase the likelihood of your debtor becoming insolvent with every day that passes following non-payment of an invoice. The key is to be proactive in your credit control process and to ensure that there is no unnecessary delay in appointing a Solicitor following exhaustion of your credit control process.
I would recommend that our low cost debt recovery service, which enables you to send a letter to a debtor threatening Court action for £2.00 plus VAT, be seen as an automatic extension of your debt recovery process. In other words, the moment your letter cycle has been exhausted, I would recommend that you instruct us to send a letter to your debtor, so that continued pressure is applied.
Many companies are juggling debts and paying those creditors that “shout the loudest”. Your debtor may however, get to the point where it can no longer juggle debts and therefore, insolvency is unavoidable. To limit this risk, I would recommend sending a letter before action / issuing Court proceedings, through our service, in order to add volume to encourage your debtor to prioritise your debt before it is too late.
© Breeze & Wyles LLP 2013


Debt Recovery: Fact Sheet 2 - Simple steps to improve your debt recovery

The Importance of your Terms and Conditions
When taking steps to improve your internal credit control function, one of the key things to get right is your customer facing terms and conditions. A well drafted set of terms and conditions can make your internal credit control function far easier, thereby reducing the number of invoices that are to be written off and potentially, the average number of days for payment of your invoices!
Terms and Conditions can be likened to a personal Will. How? In the sense that a business knows that they should have updated terms and conditions but in reality, reviewing and updating the terms and conditions often gets pushed to the bottom of the priority list. This is until something prompts the business to address this issue. Unfortunately, it is often litigation or having to write off a business debt, which causes a business to realise the shortcomings in the terms and conditions. By that point of course, the business has suffered a financial loss.
Ensuring that your terms and conditions are regularly updated, is however only half the battle. There are other steps that you can take, to ensure that your life is made easier when you come to chase an unpaid invoice. These steps include;
Ask your client to sign and return your terms and conditions
• It goes without saying that if you have a signed copy of your terms and conditions on your file, it is far easier to evidence the payment terms that have been agreed with your client.
• It is sensible to diarise a chase of all customers who fail to return their signed terms and conditions, within 7 days.
• In an ideal world, you will have always have signed terms and conditions on your file before supplying any goods and services to your customers.
• In reality, this is not always possible. Where this is impracticable, it is sensible to ensure that your covering letter, which encloses your terms and conditions, states that where you receive subsequent instructions from the customers to supply goods or services, the customer will be deemed to have accepted the terms and conditions, even if they do not return them signed. A copy of this covering letter should be retained on the customers file. This again assists you should the debtor subsequently argue that they did not agree your terms and conditions.
Invoices
• It is sensible for your invoices to state on them the last day for payment and / or the agreed payment terms.
• It is recommended that you diarise the expiry of the payment term, so your internal credit control function can commence chasing payment immediately, even if this is simply a polite call to the debtor.
Credit Control
• Ensure that your internal credit control function has a “letter cycle” which starts as soon as the payment terms have expired.
• Make sure that your credit controller is fully aware of the terms and conditions and that he / she makes reference to them where appropriate (e.g. where there is a retention of title clause in the terms and conditions, this is often a useful tool to encourage prompt payment).
Other Considerations for your Terms and Conditions
• Where you supply goods, do you retain title in those goods (under your terms and conditions) pending full payment of your invoice?
• Do your terms and conditions allow you to claim interest and compensation for late payment?
• Do you seek a personal guarantee from directors where you are trading with a new client, limited company or an unknown quantity? Is this appropriate in the circumstances? If it is, this can dramatically decrease your annual “write offs”.
• Have your terms and conditions been reviewed in the last 12 months? Or following the delivery of new goods or services? If not, we would recommend that these be reviewed and where necessary updated, in order to ensure that they are as watertight as possible thereby increasing your chances of recovery, should litigation prove necessary. If you would like Breeze and Wyles to review your terms and conditions, please contact our Brendan O’Brien on 01279 715322.
© Breeze & Wyles LLP 2012