The Process of Enforcing Business Debt

[tingley20]

Hello.

I am new to the forums and need some general advice.

I set up my Limited Company a few months ago and the intention was to work towards beginning selling at the start of January, although I knew it would be quiet with it being after Christmas.

Unfortunately, this has not been the case and we have only made our product available for sale in the past week because of delays in getting liscenses etc.

Anyway, the company has amassed just under £2000 of unsecured debt which it owes to nine different creditors, but we are unable to make full payment on these because of delays and lower then expected sales. Now we can make pro rata reduced payment but herein lies the problem.

Two of the creditors do not want to know. They want full payment or they say they will pursue legal action, so I wanted to know just out of interest what the procedure is for the legal enforcement of business unsecured debt?

Broadly speaking is it the same as a personal CCJ, through the small claims court or is it a lot more complicated. I want to know what to expect you see?

Thanks

tingley20

 

[Tej]

Seems you are trading whilst insolvent. You have debts of £2000 over 9 creditors.. and you cannot pay having just started the business.
Having seen your other post re the advertising scam.... it would be better for you to cease trading, and advise all your creditors accordingly.

What capital did you start off with?

Best bet is to close.. and start up again later.. much later when you have gained some experience.

Way to learn.

IMHO

Am sure, others who are experienced in these matters will guide you better.

 

[tingley20]

Seems you are trading whilst insolvent. You have debts of £2000 over 9 creditors.. and you cannot pay having just started the business.
Having seen your other post re the advertising scam.... it would be better for you to cease trading, and advise all your creditors accordingly.

What capital did you start off with?

Best bet is to close.. and start up again later.. much later when you have gained some experience.

Way to learn.

IMHO

Am sure, others who are experienced in these matters will guide you better.

Thank you for your message.

I am quite sure I am not trading insolvent The business has enough assets to cover the debts if need be, but very little cash and if I sold the assets I would have no choice but to close the business. The business is suffering severe financial difficulties. That is obvious. I need to be absolutely clear here. it is not that I cannot pay the debt. The problem is that I cannot pay the debt in full when it falls due. I can only offer a reduced payment on the debt, which I appreciate is not the best situation, but I am fairly certain it is only a temporary situation. I was under the impression that I would not be able to continue trading if the following apply...

a> the assets are not enough to cover the shortfall in the debt

b> there is no reasonable prospect the business will improve.

The issue is that the creditors are unwilling to assist me which is their call. I need to know whether the enforcement procedure follows that of a CCJ or what?

With all due respect, I cannot understand why me being targeted by an advertising scam has any relation to my businesses financial performance. It is a completely seperate issue altogether.

Closing this business is the easy way out and I will only do so when I am trading illegally. If I can work with my creditors, even if it involces a CCJ then I will do so.

 

[saxondale]

credit card.

 

[bovine]

123. Definition of inability to pay debts
(1) A company is deemed unable to pay its debts - [...]
(e) if it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due. This is known as cash flow insolvency.
(2) A company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company's assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities. This is known as balance sheet insolvency.

So your company is insolvent.

But, to answer your point they would need to write a letter before action, then apply for a ccj against you. Then they need to enforce. It all takes time, so you should be able to pay it off before it gets to that.

Surely your big problem is you are hacking off your suppliers. Not good when you are starting out! I think a credit card is going to be your new best friend as they will all want paying up front from now on.

 

[iwgraphics]

You say you can pay some of it, so go ahead and pay it!

Send them the payment with a cover letter saying here is a part payment.

The people chasing you will back off if you pay something. What they demand and what they will happily accept are 2 different things.

Even if you pay them £50, it will help as it shows an intention.

Also, in relative terms, I have to say if you owe 9 parties a total of £2000 (ie. such a small amount) and you cant raise the cash to pay that within a few days or weeks, you should perhaps reconsider being in business altogether.

Most small companies with the bare minimum rent, 1 phone line, 1 mobile, 1 internet connection and basic office expenses would spend near that in a month every month. If you dont have it, i'd move on to do something else in life....

regards

ian

 

Firstly, the creditors will be jumping up and down because you are a new company and they've taken a "risk" on you and it hasn't paid off. In business terms your debts are small £2000 between 9 creditors.

They will attempt to collect the debts in-house before fielding it out and therefore will threaten legal action.

In my honest opinion the worst they are likely to do is issue a CCJ, you say that this doesn't bother you. This is a rather naive outlook and you are not thinking about the consequences moving your business forward - anyone with access can credit check a company (we do this day in day out) and no-one will want to work with you as a new business with CCJ's unless it is cash upfront.

If a CCJ is issued then the creditor could go for something like a Warrant of Execution to send bailiffs to collect the debts. If you premises are solely commercial they do not require permission to enter the premises.

Your best bet is to be honest with your creditors and pay what you can afford now and keep your payments regular - you may find that they may be more understanding than you think.

 

[tingley20]

Sorry Guys.

Yes you are right. I don't mean I want a CCJ. Just stressing a bit, and all I need is time to sort it out.

We have sorted our financials out this morning so I have an exact snapshot of the business at this moment in time. We are generally a cash only business anyway and obviously with the exception of the debts I have at the moment, our suppliers are mainly paid in cash anyway.

I have written to all of my creditors this morning to make a pro rata payment over three months as well as sending a token payment I can afford. Before anyone asks the reason why I have done it over this perios of time is because I will be able to manage these payments without much of a problem.

In all honestly I know the seriousness of the situation, but stress out too much about trying to arrange things before things go too far.

I will wait and see what happens now...