The aim of a business contract is to try to provide certainty for both parties.
Legal action against me to recover a debt
COUNTY COURT JUDGEMENT
If a creditor has taken reasonable steps to recover a debt that is outstanding, then they could apply for a County Court Judgement (CCJ). The court will then decide whether there is a debt to pay and, if the debt can be proven, the court will issue a CCJ.
A County Court Judgement against a limited company is a court order, issued by a county court, that enforces the payment of a debt. Typically, you will have 14 days to respond to the CCJ and will need to do so by completing the relevant paperwork. If you need more time to do so, it is possible to ask the court for an extension for 14 days.
If you fail to respond to the court, it will undoubtedly issue the CCJ. This can have a significant impact on your business and your position as a company director.
A statutory demand is a formal, written request for payment of a debt. If a company or individual receives a statutory demand, they then have 21 days, either to pay the amount owed, agree terms for repaying it, or challenge it. A statutory demand is more often issued, in the case of a company, after the creditor has issued a county court summons and a CCJ has been made.
A statutory demand can be served in person or by post or email, it should never be ignored as it can often be the first step taken before the issuing of a winding up petition (for a company) or bankruptcy petition (for an individual).
There are several matters that a creditor wanting to issue a statutory demand must be able to evidence before issuing a statutory demand:
- The debt must not be in dispute
- The notice must be served on the company’s registered address
- If the person owing the debt is a sole trader, then the debt owed must be more than £5,000
- If the person owing the debt is a limited company or LLP, then the minimum debt owed must be £750
- The debt must not be subject to a voluntary arrangement or being paid off through installments under a debt relief order (for individuals)
- The creditor must not owe money to the debtor as in this instance there could be a case for set off or a counter claim
- The creditor must not have security over the assets of the debtor that is valued at a level that is greater than the debt
WINDING UP PETITION
If you have accrued HMRC arrears and are concerned about the potential consequences, please get in touch with one of our team members. We offer a no nonsense, free of charge consultation where we will assist you with understanding how to resolve the situation, regardless of the circumstances of your business.
A winding up petition is a legal notice issued by a creditor, for example HMRC, with the intention of forcing a company into closure. Winding up Petitions cannot be issued for debts of less than £750. There is no maximum threshold.
The petition is presented at court where a judge will hear the case. A petition is usually preceded by a Statutory Demand, which is a serious legal action and you should act immediately if you have received one. If the debts remain outstanding after the petition has been served, then the creditor will make an application to the courts to have the company compulsorily wound up.
Once the Winding up Petition is advertised, your creditors will become aware of the situation that you are facing. One of the likely outcomes at this point is that your banks will automatically freeze the company bank accounts. This means that you will not have access to the cash in your account and it is likely to result in your business being unable to continue to operate.
A winding up order is the court order made following a successful winding up petition and it is this order that places a limited company into compulsory liquidation.
As soon as the Order has been issued, the Official Receiver will commence the process of winding up your company.
A petition is a serious action and should not be ignored, you should seek advice urgently, at this stage there are limited options available to you.
If you have evidence that the debt owed should be disputed then you should immediately take advice, One80 can advise you on how to deal with this situation.
The debt will have increased because of the costs of the creditor that have been incurred from the legal action that they have taken. It is important to check whether any other creditors that you owe have been able to attach themselves to the petition, if they have then you will need to ensure that you pay the amounts due to them as well.
You could attempt to negotiate a repayment and agree that ensure that they do not advertise the winding up petition. Once the petition is advertised, the company’s bank accounts and assets are frozen.
After the seven-day period has elapsed and the winding up petition becomes an Order, it is increasingly difficult to rescue the company. Without intervention it is likely that the court will appoint an Official Receiver to wind up the company.