The Corporate Insolvency & Governance Act 2020 was announced on 23rd April 2020, and introduced by the UK Government on the 25th June 2020, having received Royal Assent. The Act was introduced for a number of reasons, companies could get longer periods of time granted by Companies House to file their Accounts, Confirmation Statements & Postpone AGM’s etc.

Debt Collection During Coronavirus

From a debt collection and litigation perspective, the act temporarily prevents a creditor presenting a Winding Up Petition to court on the back of an expired Statutory Demand, for the period between 1st March 2020 to 30 September 2020.

The Act also has an additional clause, that during the period 27th April 2020 to 30th September 2020, any creditor wishing to present a Winding Up Petition to court on the grounds of the debtors inability to pay its debts as they fall due, which is normally the case in a debt collection scenario, would have to demonstrate to the court that the companies inability to pay had not been caused by the Coronavirus Pandemic. This would most probably be very difficult to prove to a Sheriff or Judge.

Last week on Thursday 24th September 2020, following spikes and clusters of the Coronavirus all over the UK, and further new restrictions and lockdowns being introduced, the Government extended the restrictions on Statutory Demands and Winding Up Petitions until the 31st December 2020.

Whilst we are in agreement with the Act, why it has been introduced and its effectiveness to protect businesses and their staff through the pandemic, there is two sides to this story which we feel may have been slightly over looked by the Government.

What are creditors supposed to do to keep their own cashflow going, if the debtor is unable to pay? They can raise a Judgment (England) or Decree (Scotland), but this is typically a very long process, and during the current times we find ourselves in Creditors need prompt payment of their outstanding accounts to keep trading as well as business that may have been badly effected by Coronavirus.

Debt Collect UK have been working right through the pandemic, and have found since the Act was introduced debtors are using it as an excuse not to pay, and are therefore withholding their payment until the restrictions are lifted, some in the hope that the creditor will go through some sort of insolvency procedure themselves due to their non-payment of the account, particularly when dealing with high value debts.

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This is a case study illustrating how a Greek translation company recovered  a large debt from UK translation company. Our Greece-based client was owed £109,000 (€125,000) from a UK translation company. The invoices raised were between 1 – 6 months old. Our client had no idea how to pursue the debt. They had consulted with their lawyers in Greece, who had advised them that this would be a very lengthy, time consuming and expensive process, as they would need to raise a court action locally, obtain a European Enforcement Order, transfer this into the English Courts and then have the order enforced. All of this would take 3 – 4 months depending on the courts in both countries.

Our client was in severe financial difficulty because they had not been paid for such a large sum and could not afford to pay their Greek legal advisor’s costs or wait another 3 – 4 months, maybe longer, to obtain judgment in England. They were also advised that even once this had been granted, there would be no guarantees the UK translation company would have paid. This would have meant that our client would have had to have the judgment enforced, thus incurring further expense and time before being paid.

After an investigation by one of our debt recovery specialists we discovered that the company was well established having been registered in the UK for over 30 years. The company also had assets, a good net worth and a number of floating charges (Credit Agreements) outstanding to the bank and they had no judgements registered against them. We advised our clients that the chances of recovery on this case looked favourable.

We served a statutory demand via registered post and spoke with the director of the company after this was served. Our client had never spoken to the director despite their efforts before. The director of the company advised that they wanted to repay the debt in five instalments, which included £13,963.80 (€16,000) in debt recovery costs and interest which we had added to the £109,000 (€125,000), which was originally owed. Our clients agreed to the proposal and the debtors made the first two months’ payments successfully. Then they defaulted. We couldn’t get a response from the director of the company or any of the staff about payment of the balance. We work in connection with a firm of UK solicitors, who, after carrying out a risk assessment on the translation company advised that a Winding Up Petition (Liquidation Petition) could be served on the company free of charge. As the translation company was well-established and had assets this passed our solicitor’s risk assessment and we presented the Winding Up Petition to court. On presentation the translation company immediately paid in full – including all debt recovery, interest and legal costs.  

The benefits of using a debt collection company such as ours compared to the client’s lawyers were:

1. The debt was recovered in full within 3 months 
2. Client received over £40,000 within the first two months of our involvement, which helped them stay afloat and increased their cash flow
3. The costs and interest recovered from the debtor company covered our fees in full so the collection cost them nothing and they had no legal fees to pay upfront

Contact us for International Debt Collection

Think we could help your business? For free initial debt collection advice please call us on 0333 800 8919 or contact us online.

From time to time every business will experience the unfortunate scenario of a customer who refuses to pay an outstanding account and ignores any reminders or chances they are given to settle the outstanding balance. For language service providers dealing with clients from all over the world recovering international debts can be daunting.

Each country has different debt collection laws and many of them can be complex. For instance in the USA most States have different laws affecting debt collection, and these are completely different to laws being applied in Europe or Asia. It’s extremely important that firstly you instruct a reputable, well-established, professional company to recover your money if you are having no success yourself. This article will outline the checks you can do before offering credit, as well as what your options are if you have to recover a debt from a client.

What checks should you do before offering credit?

1. Credit checking your potential and existing clients can help to reduce any risk as to whether your invoices will be paid. You do not require any permission from Limited companies to carry out a credit search on them, the situation is slightly different if you are dealing with a sole trader, you would need to ask their permission as these searches are registered on their credit file and can affect their credit rating. The search will give you an excellent snapshot into the company’s or individuals financial position in the form of a credit rating, company’s net worth, any floating charges they have to the bank, any other directorships the director has, and if they have any court actions or judgments against them. In the UK companies such as Experian or their business arm will let you check out companies or individuals for a fee. My own company, Debt Collect UK, can carry out these checks on UK companies free-of-charge and for a small charge for overseas companies. Other reputable debt collection companies may offer the same service.
2. Get your clients to fill in a credit application form. Using the form you can gather vital information about an individual or company you are dealing with, such as: the business and home addresses; mobile and landline numbers; gathering references from other suppliers; bank details. You can even include a basic Personal Guarantee, which means that you can pursue directors personally if the company goes into liquidation or does not pay you. All this information is extremely valuable for your own credit control and also if you need to instruct a debt collector or solicitor to recover your account for you.
3. If you ask for references you should always follow them up. First check you have not been supplied with bogus references. You can do this simply by checking out the referee company with a simple Internet search. The referees should have a presence via search engines such as Google, Safari or Firefox.  Check out their websites and judge whether it looks genuine. Do the telephone numbers match the ones on your credit application form? When you call, do not be shy about asking plenty of probing questions such as: How long have you traded with the business? What’s the Directors name? Have you had any issues with payment in the past? What amount do they turn over with you a month? How do they pay you? All of this may take up 15 minutes of your time, but it’s a lot less time than you will spend chasing a debt if they don’t pay you.

Late payment or bad debt?

It’s also very important to recognise the reasons behind why you have not been paid. If the amount owed is undisputed, then the reason will almost certainly be that your client is in some sort of financial difficulty or experiencing cashflow issues. If the company has been unable to pay you, it’s highly likely that they will have other suppliers who won’t have been paid too. Search business forums for intelligence. No doubt those companies will be considering using the services of a debt collector or litigation solicitor too. Given our own company’s knowledge of the translation industry, some of the most effective ways to find this out are through forums, or by speaking to some of your peers. It’s vitally important that you act as quickly as possible though. We say to all our clients after 60 days from your invoice date. The more time you waste on repeating the credit control process, such as reminder letters, emails, texts and phone calls, the less chance you have of recovering the outstanding debt. If your first letter, emails and phone calls do not work, it’s unlikely that the third letter will work either. In the meantime, another supplier could have instructed a third party to recover their debt and been paid in front of you, as they were shouting the loudest.

Most businesses, no matter the size, will have some credit control procedures and processes in place. These must have an efficient process of establishing when a late payment requires further attention before it becomes a bad debt. You can establish this from chasing your client for the money owed. Do not be afraid to ask them forward questions such as, “When are we going to be paid?” “How are you going to pay us?” “What’s the hold up with the payment?” This should then be followed up on the day the client advised you they were going to pay. Don’t be scared to ask your client for your money. You should also look at your client’s past payment history to evaluate if this is a late payment or a bad debt. In some industries payment after 60 or 90 days is not uncommon, in construction or manufacturing for instance. You should have clearly outlined your payment terms in your Terms & Conditions or on your invoices, by law you must allow a debtor 30 days to pay, no matter what your payment terms are. After this period then it’s up to you to decide when you want to decide that this account is a late payment or a bad debt, as we have stated above 60 days is more than sufficient, but once you decide that the case is a bad debt you should refer the account to a third party as soon as possible.

Lawyers or Debt Collectors?

Solicitors or lawyers definitely have a place in the debt collection process and the work they carry out can just give a debtor that final push to pay you. However, the pitfalls of instructing a solicitor to recover your outstanding account is the cost. A good litigation solicitor in the UK can charge anywhere between £250 (€285) to £450 (€513) per hour for their services so it’s when they are instructed in the whole debt recovery process that matters. There are loads of solicitors out there who will send a “Letter Before Action” to your debtor, for a very small fee of around £25.00 (€29). The letter is printed on the solicitors headed notepaper and gives the debtor a heads up that you are intending to take things further, but these letters have a poor response rate, little impact and rarely lead to payment, leaving you with the option to then pursue the debtor through the courts, and this can prove expensive depending on the size of your debt and which action you decide to take against the debtor. The biggest factor to remember in all of this is that despite you paying the solicitor their fees and the court costs this does not guarantee you are going to be paid. You may need to enforce the judgement you are granted by the court, again at further expense without guarantee of payment. Or if you presented a Winding Up (Liquidation) Petition then the company could go into Liquidation or they could appoint their own Administrators or liquidators. Solicitors will also not investigate a debtors financial status, ability to pay or company status, so you could just be wasting your time and money.

Debt Collectors – who to trust

Before you decide to use a solicitor or lawyer, it’s worth considering the services of a debt collector first. Reputable debt collection agencies will work for you on a no collection no fee basis. Never, ever pay any of these agencies upfront fees or registration fees. There are a lot of unscrupulous people in the sector, who give the industry a bad name. So, just like the checks on your clients, check out the debt collection agency before you engage them.

If you are unsure of the agency you can ask them to supply references from some of its existing clients. Phone some of them to check that they are genuine. The debt collection agency should be well established and should have been trading for a number of years.

You should ask to see a copy of the debt collection agencies Terms and Conditions before instructing them to carry out a collection for you or signing any paperwork. Their rates should be clearly stated with no hidden charges.

In the UK the Financial Conduct Authority (FSA) recently took over the regulation of the debt collection industry from the Office of Fair Trading. In most other countries there will be other regulatory arrangements. You should never use an agency that is not registered with The Financial Conduct Authority. This applies to LSPs established outside the UK, but seeking to recover debts in Great Britain. A local debt recovery agency can often work better for you in such a situation.

Each UK agency needs to obtain the correct “permissions” from The Financial Conduct Authority in order to be permitted to collect debt. They will all be given a registration number, which is sometimes found on the agencies’ websites or their stationery. You should ask for that number and check it is genuine on the FSA website.

Contact us today

Think we could help your business? For international debt collection advice please call us on 0333 800 8919 or contact us online.

We are often asked by our clients, When, is the right time, and how long should they wait before taking action against, their client and instructing our debt collection services?

We say to our clients we wouldn’t let invoices go over 90 days from the date of issue without taking action, as the older a debt becomes the harder it is to recover. However, in most businesses every client is different, and it really depends on the payment history that client has had with them in the past, along with how long they have traded with them.

We were contacted by a new client in Mid-December 2017, who was owed a substantial sum of money from Kleeneze Limited, who have only last week gone into Administration, as reported in National Press.

Kleeneze administration

Our clients had dealt with Kleeneze for several years, and they had always paid them within our client’s payment terms, they were also sitting on a lot of stock which had been previously ordered and was specially made for them. As a long-term relationship of trust and payment had developed over the years of trading, our client was very reluctant to instruct us to collect the debt from Kleeneze as they wanted to keep the relationship intact, but they had not been paid or had any response regarding payment for over 60 days. On further investigation, we uncovered that the company had a number of active County Court Judgments registered against it, this coupled with the fact they had not heard or had payment from them for 60 days, they decided to instruct our services.

Serve a statutory demand

Once we had served a Statutory Demand upon the company we began to negotiate with them on repaying the debt. They were looking to repay the debt over 36 months but we managed to get them to repay the debt over 2 months. We made a full recovery including all our costs on behalf of our client.

The business went into Administration on 12th April 2018, around 6 weeks after we had made a full recovery, so our clients were extremely lucky to have taken action when they did.

Contact us today

Think we could help your business? For free initial debt collection advice please call us on 0333 800 8919 or contact us online.