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Debt collection: How can you protect your business?
Disputes between businesses and customers are common. If you cannot agree a settlement, your business may be called to the Small Claims Court or a higher court. If the judge rules against you, and your ex-customer is awarded their money back or receives damages, you are expected to pay up or potentially face a visit from the bailiffs. So, how can you protect your business when this happens?
Bailiffs cannot attempt to take control of goods without giving advance notice. They cannot enter your property unless you have received this notification seven clear days before their visit. Check that the bailiff has the correct documentation and is authorised to execute a Writ of Control or a Warrant of Execution. Without it, items cannot be removed from the property.
However, if a claim has escalated straight to the High Court, enforcement officers appointed by the court can enter your building without notice but will require a court order to seize goods.
The items that bailiffs can take depends on whether you operate as a sole trader or as a limited company. If you are a sole trader, your business debts are treated the same as your personal debts. An Enforcement Agent can take control of goods that will raise enough money to cover the debt, plus interest, and their fees.
If you have received advance notice that bailiffs have been instructed it is recommended to seek legal advice as quickly as possible. Even if a business debt is involved, the bailiff can take items from your home, including any jointly-owned items, cash, and cheques.
Bailiff cannot take anything belonging to a child, hire-purchase items that have outstanding finance, or are leased, or items considered essential for everyday life. such as a washing machine or cooker. The bailiff also cannot take anything that is considered essential for work or study, such as your computer or tools, up to a value of £1,350. Any items worth more than this can still be seized.
If the bailiff wants to take something that you think is exempt, you will need to prove it, for example, by showing receipts or order forms, and explain why you need the item.
If the debt is against a limited company, then only goods that belong directly to the company can be removed.
Depending on the situation, there may be other options to explore with your solicitor, including setting up a non-insolvency informal arrangement, which might be suitable if you have short-term cash-flow problems.
If you cannot pay the money demanded immediately, but you can repay in instalments, you could negotiate to enter into a ‘controlled goods agreement’ (CGA), where the bailiff will identify goods or property that could cover the value of the debt (plus fees and interest). They will visit your business property to compile a list of assets to be controlled under the CGA. You will not be able to sell, remove, or give away these items. However, you will still be able to use them, thus providing a lifeline for businesses depending on them to operate. However, if you miss any payment, the bailiffs can return and take them away.
If your business has received advance notice of debt collection, do not simply ignore it. Professional legal support can help you take control of the situation, freeing up your time so you to concentrate on getting your business back on track and ensuring you benefit from expertise to help negotiate a stronger deal.