A survey by the BCC showed 51% of businesses in the UK feel payment times are taking longer. Sometimes this is enough to bring profitable companies close to disaster. Herrington & Carmichael’s Frank Tierney gives businesses advice about recovering from debt!

What To Consider First?

Is the debt disputed? If it is, the new Pre-Action Conduct Protocol will apply. This requires parties to settle the matter through Alternative Dispute Resolution (ADR) before court proceedings can begin. But if the debt is undisputed the new Protocol will not affect you.

Recovering An Undisputed Debt?

If you have not received payment by the due date, you should send a letter giving the debtor 14 days to explain why they have not paid or contacted you to put payment proposals forward.

But if you are unable to come to an agreement, or your debtor doesn’t meet this plan any you are quite sure they have the money to pay, you can raise the importance of clearing your invoice by issuing a Statutory Demand which gives the debtor 21 days to pay, agree a payment plan or make a Court application on the basis the debt isn’t due or is disputed.

If the debtor still does nothing after 21 days, you can issue a Winding Up petition to put the business into liquidation - the primary aim being to get them to pay up, not actually liquefy their business.

If you don’t like this idea, you could issue a ‘letter before action’ instead to confirm what money is owed and why and who the money should be paid to. Furthermore it should say that if you haven’t been paid within 7 days you will begin court action to recover the money, interest and court costs. If there is still no response, you can begin court proceedings

What About Disputed Debts?

This is where the new Protocol comes into play. It means both parties have to try to settle the dispute without resorting to court action - Alternate Dispute Resolution (ADR).

ADR can simply be round table meetings with both parties present to try and deal with the dispute and form a deal. Mediation by an independent facilitator may be involved in such meetings.

An ADR can operate in different ways, so you should speak to your solicitor about your options. But a claim letter is required which sets out, clearly, the information the other side needs in order to understand what your claim is, why it is due and copies of documents you rely on to show this.

If you already know payment has not been received because of complaints about the goods supplied, the letter should say why these are unacceptable to you and when you expect full payment.

You must also warn the debtor about Protocol and the results of ignoring it. They must acknowledge your letter within 14days and give a detailed Response letter saying what sums are disputed and why, including supporting documents.

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