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Terms
County Court Proceedings
Bailiffs’ Action
Statutory Demands
Walking Possession
Distress
Turnaround
Administration
Company Voluntary Arrangement
County Court Proceedings
If a creditor has demanded payment from you and you have not paid they may attempt to take proceedings and issue a county court
summons. Unless you can reach some sort of agreement with them they will probably get an order from the court giving them judgement against the
company for the amount it owes together with any costs that they have incurred. This judgement will be registered with credit reference agencies and
affect the company’s standing.
If the judgement is not paid within the timescale set by the court, then the creditor could proceed to issue a winding-up petition
against the company.
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Bailiffs’ Action
Once a creditor has got a judgement they can ask the court to issue a warrant of execution and if payment of the judgement is not made
bailiffs will be sent to premises to take items away to sell at auction to cover the judgement debt.
When a bailiff attends he is not entitled to force but can enter through any open doors or windows. If you are expecting a
bailiff to call then the advice in simple terms is to keep all doors and windows locked and not let them in. Once they have taken walking
possession (see below) the situation is different because they are then entitled to force entry to get to the goods.
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Statutory Demands
A creditor could also decide to issue a statutory demand in respect of any debt which is over £750. The debt must be
paid within 28 days and failure to pay could lead to the issuing of a winding-up petition against the company. Once a winding-up petition is issued
it is likely that the company’s bank account will be frozen immediately.
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Walking Possession
This is when the enforcement officer from the County Court or High Court who were formerly called bailiffs and sheriffs visits your
premises. If you are not able to pay the debt they are entitled to take walking possession of the good which means that they will take a list of the
goods and take possession of them but not actually take them away. You will not then be allowed to sell or remove the goods if you do this will
be a criminal offence.
If an agreement is not reached to either pay the judgement debt or pay off the judgement list in full or over time the bailiff can
return after five days and take the goods away to be sold at auction. At that juncture if he is not allowed into the premises he is entitled to
force entry into the premises.
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Distress
This is a procedure used, usually, by landlords (but which can also be used by the tax authorities) whereby if there were arrears of
rent the landlord is entitled to enter the premises and take goods away for sale, usually by auction, to pay the outstanding rent. The landlord is
entitled to do this even if the rent is only overdue by a very short period of time.
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Turnaround
This is a term used to describe a situation where a specialist advisor will go into a company and look to turn it around from a loss
making entity into a profitable business. This is usually achievable where a situation has not got too desperate and where there are maybe only one
or two major creditors. In that case it is usually possible to approach those creditors and explain the company’s situation to them in detail
and explain why it is in the creditors’ interest to let the company time to make payment. Usually a creditor will know that if they force
a company into liquidation by issuing a winding-up petition or the like that they will receive only a small proportion of what they were actually
owed. Creditors will therefore often be agreeable to listening to a company when it puts forward repayment terms and may even agree to
write off a portion of their debt.
If there were a large number of creditors because of the difficulty in attempting to reach agreement, on an informal basis with those
creditors turnaround is not usually possible unless the company can afford to pay the other creditors on a timely basis. In these circumstances
it is usually necessary to go down a formal insolvency route which can bind all of the creditors to a set agreement.
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Administration
This is a procedure that is used by a specialist advisor, and insolvency practitioner, to apply to the court on behalf of a company that
is struggling and ask the court to make an order protecting the company from its creditors. This will stop all of the creditors from bringing
legal action against the company of any form. This will then give the administrator time to restructure the company to hopefully leave a viable and
profitable entity. This procedure is useful where there is a portion of the company that is profitable and can be saved. The dead
wood as it were, can be cut away the hope being that the profitable entity will create sufficient funds to allow a better return to creditors than would
otherwise be the case.
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Company Voluntary Arrangements
This is a procedure whereby a company with a number of creditors can make an offer to its creditors in settlement of the debts that
those creditors are owed. It will usually offer a better return to creditors than if creditors were to take legal action to stop the
company trading such as forcing it into liquidation. The creditors will be bound by the arrangement and will not be able to take any legal action
against the company. They will only be entitled to receive a proportion of what they are owed from the voluntary arrangement which will be
administered by an insolvency practitioner. The company will usually pay money over to the insolvency practitioner out of its profits or
following the sale of asset the insolvency practitioner will then distribute that money to the creditors. This sort of procedure will nearly always
involve creditors agreeing to write off a large proportion of that which they are owed but creditors are often agreeable to this because it will provide
them with a better return than the alternative which is usually liquidation.
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