Winding-up petition

My initial reaction is that you should not hold out much hope of recovering anything......but if you do treat it as a bonus.

Once you get this far down the line the chances of getting paid are remote.

If you think the Company has the ability to pay but it simply refusing to do so, the threat of (or actually issuing) a winding up petition can be useful.

However if they don’t then pay it probably means they can’t.

Chris

If you've issued the winding-up petition there's probably not much more to say. If I remember correctly, the petition costs £500 and you have to advertise it in the London Gazette. At that point the company's other creditors are likely to become very twitchy and credit ratings will definitly suffer! That in itself may well be fatal to the business.

The best approach is to use carrot and stick; send copies of the unissued petition to show you're serious (presumably you preceeded it with a statutory demand), and negotiate some kind of sheduled payment scheme. If they still have any cashflow, the trick is to get paid in preference to someone else (assuming they don't have the money to pay everyone). If they do get wound-up, expect nothing.

I'm not a solicitor but I seem to have learn quite a lot about this recently.

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If they still have any cashflow, the trick is to get paid in preference to someone else

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That "trick" could have you paying the money back to the liquidator as a voidable preference if the company then goes into liquidation.

I'm not sure why your first step was a winding up petition. Why not just sue to recover the debt? Much simpler, and if nothing is recoverable, you know that it isn't worth winding the company up. If there are some assets left, let the bigger creditors do the hard work and just notify the liquidator of your interest once someone else has wound the company up.

I should add that this isn't my area of practice, and although I have practised in the UK quite a few years ago (and the principles don't vary much) I am not an English lawyer. This is therefore not legal advice and you should discuss this with your own lawyer. How's that for a legalistic disclaimer?

Ross

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Originally posted by Ross Blackman: This is therefore not legal advice and you should discuss this with your own lawyer. How's that for a legalistic disclaimer?

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A lot better than Naheed's neanderthal advice. Geez! Let's go out and take our baseball bats... Who cares if you're the one who winds up in court?

Herman

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That "trick" could have you paying the money back to the liquidator as a voidable preference if the company then goes into liquidation.

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Yes, of course you're right Ross, but possession is 9/10s of the Law, and in most cases nobody can be bothered to throw good money after bad once the company goes into Liquidation.

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I'm not sure why your first step was a winding up petition. Why not just sue to recover the debt?

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I think the first step was/should have been a Statutory Demand. Sueing won't get you the cash, it's recovering the money that's the problem here and the courts don't do that bit.

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possession is 9/10s of the Law, and in most cases nobody can be bothered to throw good money after bad once the company goes into Liquidation.

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I think you will find that the liquidator will happily pursue you to recover that money. Remember, he gets paid by the hour.

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Sueing won't get you the cash, it's recovering the money that's the problem here and the courts don't do that bit.

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Yes they do. Once you've got a judgment in your favour, the court will enforce it if it's not paid. This normally involves seizing possession of goods to be sold to pay the debt, which is done by a court officer. If the original legal action hasn't scared the defendant into paying, the arrival of a bunch of guys with a van and a court order to seize whatever's handy normally does the job.

Ross

Dream on Ross ... the door is politely opened to the baliffs and they are welcomed to remove the contents of the stationery cupboard. Everything else is leased/rented/borrowed/broken. Believe me, I've been there.

Thanks for all the replies.

The company has had warning letters to pay, but ignored all.

The problem with sueing in the small claims court is that even if/when I did win, the costs are not added to the amount owed to me. So, I'd probably have to represent myself as the cost of a solicitor would be pretty high. I've also heard that some cheeky companies keep deferring the court date as it approaches by saying they're ill, etc...

With a winding-up petition, all legal costs are added to the amount owed. The only way I'll lose out is if the company does liquidate and if it does, I probably would never have seen the money anyway. If it does go into liquidation, the petition costs I incurred go to the top of the pile to be settled, but my original amount owed will still be in the unsecured creditor class and I'll never see that.

If I do lose the lot, I wonder if I could seek payment from the companies who the agency used my photography for? The copyright of the images is still mine.

Count D

If you had a contract of engagement, you should use this in conjunction with a solicitor to issue a Statutory Demand For Payment. This is a formal legal document, costs a fraction of the amount already paid, and gives your debtor 28 days to pay or make mutually acceptable arrangements to pay (I am assuming you don't want further deferment).

If you do this, the court would look favourably on you.

If you took on work with an ad agency with no contract of engagement, you are a loony.

Don't forget that once the debt becomes 6 months old, you should issue a letter stating that you have claimed bad debt relief on the VAT, regardless of whether or not you are accounting for VAT on a cash basis.

If the company does go into liquidation, you would be an unsecured creditor. You would get x pence in the pound, depending on how far up sh*t creek they really are.

As for the copyright issue...IANAL, but, so long as your contract of engagement states that all copyright remains yours until payment is received in full, then you should be in the clear. If your contract does not state this, you should change your contract!

You should also state that you are charging interest in accordance with the Late Payments of Commercial Debts (Interest) Act 1998. Look here for some more info. Basically, you can charge interest and levy a penalty against the Company for late payment.

Finally, if you suspect that the Directors of the Company in question took on your work in full knowledge that they couldn't pay you when your invoices fell due, you should notify the Liquidator, Administrator or the Courts. It is possible that you could claim either fraudulent or wrongful trading by the Directors. If you are successful, then you could get full payment from the Directors personally.

To spare the interminable boredom this will induce with the rest of the forum, please feel free to drop me a line...

alex at liquidconsultants dot com

Cheers

Alex

Thanks Alex for your long and detailed post.

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Don't forget that once the debt becomes 6 months old, you should issue a letter stating that you have claimed bad debt relief on the VAT, regardless of whether or not you are accounting for VAT on a cash basis.

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Could you explain a little further. I am on cash accounting basis.

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Originally posted by count.d:
Could you explain a little further. I am on cash accounting basis.

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You need not do anything. Being on the cash accounting basis of accounting for VAT means that you do not pay over the output VAT on your sales until the customer pays. So, if you are unfortunate to have suffered a bad debt you will not have paid over the VAT in the first instance and will therefore not have to worry about reclaiming the VAT etc.

Mike

Count D / Mike

What Mike says is true.

However, by writing to claim bad debt relief on the VAT you would compel your client to pay over the VAT (that they had earlier claimed as input tax). This would inconvenience their cashflow further.

Alternatively, they could fail to account for your bad debt relief, and upon inspection by HMCE be found to be in error for their VAT and subject to surcharge and interest.

Rgds

Alex

I should have added

As you are on cash accounting for VAT, you wouldn't gain anything from this, but you could cause serious problems for your client.

If you suspect that they are not accounting for VAT correctly (which is an offence) you can inform the National Criminal Investigation Service as they would be benefitting financially from committing an offence - ie they would be money laundering. I kid you not.


Then, they could be horribly inconvenienced.

I don't recommend that you do this final step unless you are absolutely, categorically, 100% certain you won't get paid by any other means.

I still think that issuing a Statutory Demand For Payment would be your best course of action. And charge interest/penalties! You can then offer to waive these as a sign of goodwill.

Cheers

Alex

It may actually be more tax efficient to just write off the whole lot...
(I understand baseball bats are NOT tax deductable )

I just thought I'd keep you informed on the results of my claim.

I proceeded with a winding up petition and received all my money. It ended up costing the company who owed me the money, an additional £1,200. This was for solicitors fees. I have no idea how these fees got to £1,200, all the solicitors did was write a few letters and turned up at the court for an hour!

I've heard now, that the company is being forced into liquidation (or some other clever way to not pay suppliers and still continue trading).

So the lesson from my story is to act quick, hard and sod the consequences. Although I feel a little lucky.

Count.D - how is your battle regarding the village noticeboard outside your house

Derek

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Count D - Congratulations. I have lost so much money in the past and have never had the result that you have had. Well done.
I generally now don't bother, as my investment in time to make claims just isn't worth it. It is really just a fact of life when running a business.
Sometimes I do fantasise about the baseball bat scenario.

Before reading the rest of this post please note that none of this is not legal advice and you may want to engage a solicitor in this matter.

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I've heard now, that the company is being forced into liquidation (or some other clever way to not pay suppliers and still continue trading).

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This sounds like it may well be administration or a company voluntary arrangement (CVA). Now, I'm not an insovency lawyer, but the basis of the latter option is that the creditors are required to prove their debt to the insolvency practitioner. The next stage is for the company to set out a plan of how it intends to trade its way out of trouble while servicing the debt. In effect, the creditors are required to approve (by voting at a meeting) the plan. This then binds the creditors into receiving x pence in the pound. i also have a feeling there is a moritorium on suiing for the debt. Can't remember the rest (other than it being the trendy way to do things these days) so please see an insolvncy lawyer.

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I have no idea how these fees got to £1,200, all the solicitors did was write a few letters and turned up at the court for an hour!

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Sounds pretty cheap to me - I charge at the lowest rate in my firm and that's only 8 hours work for me!.

You've got a good memory Derek. The village notice board is still in front of my house, now for the ten months 13 days and two hours (not that it's bothering me). We are trying the diplomatic, asking nicely method, but they are so slow. It really is like the tv programme Vicar of Dibley.

They apparently will be moving it, but they can't decide where. They have also applied for a grant for a new board and landscaping. This no doubt will drag on for a further few months.

It's my first taste of Parish Council/Council decisions and it's not particularily pleasant.

Thanks Rasher, the baseball bat was a close second option. If I hadn't taken a risk with the solicitor, I would have felt worse if the company didn't pay me and went into liquidation. I would have felt stupid. I've now learnt not to listen to excuses about delaying payment.

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I have no idea how these fees got to £1,200, all the solicitors did was write a few letters and turned up at the court for an hour!
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Sounds pretty cheap to me - I charge at the lowest rate in my firm and that's only 8 hours work for me!.

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I knew I should have tried harder at school.

Count.d - you are a very model of tolerance - I would have given them two weeks and then backed into the notice board and so help them to reprioritise the notice board issue

Derek

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Seriously 8 hours work for that sort of money is just glutoney.

What this world needs is less of you!