Credit Management September 2023

Guiseppe Parla
Lucy Sanderson
Kim Achurch
Paula Swain
YOUR overdue debts are
increasing, and you recognise
that your credit control
process needs some external
support to try to unlock
payment in these tough
economic times and you are interested to
know what Shoosmiths collaborating with
Menzies can do to help and how they can
work together to try to achieve a recovery.
First Things First
Shoosmiths start their relationship with you
by understanding your business, exploring
your processes, and how they can effectively
plug in with their support. This will include
giving you comprehensive advice in relation
to your debt recovery options. Shoosmiths
will look at previous engagements with
debtors, average debt size, debt age and type,
and categories of debtor.
They will advise you on the best way to try
to obtain payment. This will either be via
court proceedings (for debt collection) or via
an insolvency route.
A Winding Up Petition (“Petition”) can
be presented at court when a company is
unable to pay debts as and when they fall due
and when demanded. A Petition cannot be
presented if there is any dispute, although in
some circumstances it can be presented for a
proportion of the debt.*
Before a Petition is presented, Shoosmiths
will check that there are no other active
Petitions presented against the company. If
it transpires that a Petition has already been
presented, a Notice of Intention to Appear can
be sent to the Petitioner. If the Petitioner later
seeks to withdraw or dismiss, Shoosmiths
can seek permission of the court for you to be
substituted as the Petitioner allowing you to
continue with the proceedings.
Demand for payment
Providing there is not an active Petition,
Shoosmiths will either arrange to serve a
Statutory Demand or send a written demand
for payment.
If the company can pay, then a demand
is often an effective option for unlocking
payment.
It is not a requirement for a Statutory
Demand to be served prior to presentation of
a Petition, but it is a cheaper option as there
is no Court fee. The Statutory Demand itself
may prompt payment but if the company
fails to pay within 21 days, the company is
then deemed insolvent with practically no
Before a Petition
is presented,
Shoosmiths will
check that there
are no other
active Petitions
presented against
the company.
defence to a Petition being presented. On
the downside, it gives the company 21 days
before further action can be taken.
A demand for payment of any number of
days can be used to support presentation of
a Petition, however a company can dispute
Petition proceedings if a demand letter is
sent rather than formal service of a Statutory
Demand. Shoosmiths will provide you with
advice on the best option for your debt.
If the debt remains unpaid following
either demand, the company could apply
to the court for an Injunction to prevent
the presentation of a Petition to avoid the
negative financial consequences.
The Petition
If a demand does not prompt payment,
and no injunction restraining a Petition is
granted, Shoosmiths will prepare and present
a winding up petition to the High Court via its
efficient online portal.
Once a Petition has been presented,
insolvency law has the effect of voiding any
financial disposition of the company. The
company’s bank account is likely to be frozen.
This would have severe consequences for the
company if they are seeking new finance as
an advertised petition would come to the
attention of their prospective lender.
After presentation, the Petition will be
listed for hearing to determine if a winding
up order should be made. Shoosmiths will
arrange service of the Petition and the
hearing date on the company. At this stage,
the company could apply to the court for
an order restraining advertisement of the
Petition, again to avoid negative financial
consequences.
Assuming no order has been made to
restrain advertisement, details of the Petition
and upcoming hearing will be published
in the London Gazette, which Shoosmiths
will arrange on your behalf. At this stage,
other creditors might contact Shoosmiths
to lodge notices of support for the petition.
It is not uncommon for a debtor company
to move forward with a company voluntary
arrangement, administration, or voluntary
liquidation at this stage.
If no alternative insolvency process is
proposed by the company and the debt
remains unpaid, the Petition will proceed to
its hearing date (typically 8-10 weeks from
the initial demand). Shoosmiths will arrange
an advocate to attend the hearing to seek
that a winding up order is made against the
company.
Brave | Curious | Resilient / www.cicm.com / September 2023 / PAGE 47 continues on page 28 >