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Creditor Actions

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Secured And Unsecured Creditors – What Is The Difference?

I am confused about secured and unsecured creditors.  What is the difference? As a director of a company that is doing well and making money you may have no real understanding about the important differences between certain types of creditors.  The only time it really comes up is if you apply for a loan for the business and the lender talks about security and the loan being secured etc. Secured Creditors A secured creditor is a creditor that has security over an asset or assets of the company. So, if the company can't pay then they have the right to the proceeds of the sale or proceeds of the asset.  This is enabled by a legal document called a charge or debenture.  There are two kinds of charge;  A Fixed Charge and a Floating Charge.  The difference is quite hard to explain in a few words so we have a dedicated page on the differences.  Have a read here on fixed and floating charges.  A fixed charge is essentially a charge on a very specific asset whereas a floating charge is across a range of assets or asset that can change.A charge is a bit like a mortgage on your house.  If you fail to keep up your payments then the bank can effectively force the sale of the asset and reimburse themselves.  In a company situation if the secured lender is owed money then they can "force" the company into the hands of administrators who will pay them having sold the assets.  This description is simplistic and is more akin to the old system of receivership but it illustrates the principal. Unsecured Creditors These are essentially creditors that have no security over the assets.  This can be a trade supplier, HMRC, a utility company.  Banks will often lend without security but they will charge a higher rate of interest to offset the risk they can't get their money back.Be aware though that some creditors are called secured as they have a personal guarantee from the director and they may use terminology like "secured against the directors personal assets"  In insolvency law they are not secured and so come after the secured creditors that have a "charge" over the company's assets when money is paid over in the event of a terminal insolvency event like liquidation. What about defacto secured creditors? These are creditors that do not have any security over the company's assets but they have control over the company in that they can shut it down.  An example might be the creditor that runs their proprietory software, or their means of payment (this happens when Amazon have lent the company money to develop their online shop)  such creditors are more properly referred to as "ransom creditors". Ransom creditors are more important if the company is insolvent but could be rescued and so need to continue to trade.  So they need to be kept happy!In a liquidation scenario they would be behind a secured creditor that had a charge over the stock for example.For a more detailed explanation of the priority of creditors in an insolvency situation then please look at our page on creditor priority.  There is even a handy infographic on there too. 

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Secured And Unsecured Creditors – What Is The Difference?
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What Is A Winding Up Petition By HMRC or Other Creditor

A winding up petition is a legal notice put forward to the court by a creditor. The creditor petitions to the court if they are owed more than £750 and it has not been paid for more than 21 days. The application, in effect, asks the court to liquidate the company as they believe the company is insolvent.

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What Is A Winding Up Petition By HMRC or Other Creditor

Can I Stop Bailiff Action On My Company

Can I stop Bailiff Action on my company? Bailiffs are enforcement agents who visit your home or company in demand of any unpaid creditor debts (county court judgements). It can be stressful and is most certainly not an inviting visit. You want to avoid it at all costs, by repaying the debt or creating a payment arrangement, suitable to your terms.So… to stop bailiff action the best advice is to negotiate a payment arrangement for the both of your needs. It is only then, if you miss a payment on these agreed terms, that the court order a warrant of control to allow bailiffs to remove goods if you cannot pay.You can apply for suspension of a warrant of control (as you are given 7 days notice of their visiting), by filing a N245 form out, handing to the court with a fee. The court cannot refuse the application, it must be reviewed. However, you should be aware that even after you’ve applied for suspension, bailiffs can still visit, up until suspension is granted. Creditors are sent the application and they must agree to the terms within or negotiate. Rules regarding stopping action?Bailiffs are only able to enter between the hours of 6am and 9pm You are entitled to sort out the debts over the phone or by keeping the bailiff outside, rather than allowing them to enter Ensure all doors and windows are closed to allow no unlocked access Certain rules apply if you are disabled, ill, under 18 years of age, over 65 years of age, have children, are mentally ill, fail to interpret English or have been in a recent bereavement of unemployed Firstly, check the bailiff has proof of ID and proof of why they are visiting. If you are suspicious they are debt collectors instead, then you have every right to ask them to leave and they must oblige, as they have alternative powers Any proof letters and badges must be sent through the letterboxes Only Is it for unpaid magistrates court fines and tax debts, that forced entry is allowedRestructuring Debts to Avoid Bailiff Action If a creditor is resorting to bailiff action then obviously they have tried all other avenues to collect the debt.  What if the debt itself is compromised?  A Company Voluntary Arrangement (CVA) can write off upto 70% of the company's debt if 75% by value of the creditors agree who vote at the creditors meeting.  So, if the business is viable with a smaller debt it is worth looking at this option as it can stop any action being taken against the pre CVA debt.You can negotiate with bailiffs over your payment terms, hence prevent them or delay their action.Contact us for more information, where we can provide advice and assistance regarding your debts being chased.

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Can I Stop Bailiff Action On My Company

Can A Winding Up Petition Be Withdrawn?

A winding up petition is a legal notice put forward to the court by a creditor who is owed more than £10,000 and has not been paid for more than 21 days. In essence, the creditor is informing the court that the company is insolvent and is asking to have it put into compulsory liquidation.Of course, when such a notice is received, the company will do all it can to repay the creditor or mitigate the damage of the petition by claiming that it is not insolvent or it can be rescued. When can a winding up petition be withdrawn? If the debt can be repaid, the winding up petition can be withdrawn, removing any further threat of liquidation.The creditor must obtain written permission from an officer of the company they have served the notice against, to settle the debt out of court. In this written permission letter should be the creditors intention to withdraw the petition if the debt is paid. A settlement should be agreed between the debtor and creditor. Once the payment has been received, the creditor should notify the debtor in writing that the payment has settled the debt and that they intend to withdraw the petition. The debtor applies to the court for permission to withdraw the winding up petition. Note: It must be at least five days in advance of the petition hearing and the petition must not yet be advertised. Proof will be needed to support your application, to demonstrate that the petition has not yet been advertised, that there has been a settlement and there is intent to withdraw. Once the court has given its permission for the petition to be withdrawn, a letter should be sent to the court. This letter should also be copied to all involved parties (debtor, creditor, court) as proof that the winding up petition has been withdrawn.Are there any other cases when a petition can be withdrawn? Yes. The winding up petition can also be withdrawn if the creditor decides that it is no longer worth it to continue with the process. This can be done to avoid the creditor paying the full cost of the winding up proceedings, if it is looking unlikely that the company can actually pay. What happens if the winding up petition isn’t withdrawn? It can be adjourned So long that there is good reason for it, the court can adjourn winding up proceedings. Usually it is on the grounds that the company can convince the court that it can pay the debt and continue to trade. Adjourning the petition simply means giving the company breathing space it needs to collect monies owed and figure out how it will go about throwing itself into an insolvency procedure. It can be disputed The petition can be dismissed by the court if there is proof that it is invalid, following the company disputing its accuracy.  When this occurs, the court orders hefty costs against the petitioning creditor. It can be dismissed via a CVA If the court decide that the company can repay some of, or all of, the debt through a company voluntary arrangement (CVA), then the petition can be dismissed. A CVA creates a payment plan to pay back the debt to the creditors over a period of between 3-5 years.  For more information on this process please look read our guide It can simply be paid When a company pays the funds required, the petition can be dismissed by court and removed from the court record. Being removed from the court record prevents the petition being taken over by another creditor.  if another creditor replaced the original creditor who issued the petition, the payment to the original creditor would need to be repaid to the liquidator, to avoid preferential payments from the petitioning creditor becoming more beneficial compared to all remaining creditors.If none of these actions are taken, within eight to ten weeks, the court will grant a winding up order and the company is placed into compulsory liquidation with the official receiver distributing any remaining assets to creditors.For further guidance and expert advice contact us today on 0800 970 0539.

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Can A Winding Up Petition Be Withdrawn?

What is a Statutory Demand?

Have you been threatened by a statutory demand? First things first, let us understand the term:In simple terms, a statutory demand is a written warning a creditor serves on an individual or company, requesting debt payment or an alternative and acceptable arrangement to be made. It is a legal means of collecting debt. Solicitors will issue the warning on behalf of the creditor. It is often the first step prior to the issuing of a winding up petition (for a company) or bankruptcy petition (for an individual), meaning the tool has great power. It is a court free method, bringing ease in using the tool and providing justification as to why HMRC use it.Note that it is not necessary to issue a stat' demand, as they’re often called, to initiate a winding up petition against a company, as the debt just has to be undisputed and over £750. Often creditors are advised to miss out the stat demand step. Other criteria to consider when issuing a statutory demand is that the creditor can prove the demand has been served under the correct means, the money due must not already be a part of a payment arrangement and your creditor must not have security over assets to the value of or exceeding the debt. We have received a statutory demand, now what? It should be taken extremely seriously and you must act quickly. It will cost a creditor between £200-£600 to issue a statutory demand via a solicitor so creditors are usually intent on recovering their money. A statutory demand is more usually issued, in the case of companies, after the creditor has issued a county court summons and a county court judgment has been made. For more information on other actions, please look at our creditors legal actions page.BUT if you do not respond to the statutory demand or have no defence then a winding up petition can be issued just 21 days after the service of a statutory demand. Or if this was a personal debt a bankruptcy petition may be issued if all conditions below are met and the debt is not paid.Before issuing a statutory demand, the creditor needs to satisfy some requirements:The debt must not be in dispute. If the person owing the debt is a sole trader, then the debt owed must be more than £5,000. Previously this threshold was £750. If the person owing the debt is a limited company or LLP, then the minimum debt owed is still £750. The debt must not be subject to a voluntary arrangement or is being paid off instalments under a debt relief order (for individuals). The notice must be served on the company's registered address. The creditor must not have security over the assets of the debtor, that is valued at more than the debt. The creditor must not owe money to the debtor as otherwise there will may well be a case for a counterclaim or what is known as set offUpon ignoring or not responding to the demand, it is likely that the following events will occur:Creditor serves a winding up petition against the company based on non-payment of the statutory demand Winding up petition is published in the London Gazette Banks freeze all related business accounts Creditors are alerted of this news and may take their own legal action Winding up order issued after a seven day period. This issuing leads to the liquidation of company assets to meet creditor demands Business will cease to exist following liquidationCan I have the statutory demand set aside? In certain cases, yes. If you dispute the statutory demand you can write to the court where they can cancel it, so long there are legitimate, justified reasons. For example, is the debt amount correct? Were the required legal procedures followed? Are you owed money by the creditor? Defending a statutory demand: what can we do to defend our company against the statutory demand? As a statutory demand is often served after a county court judgment (CCJ), the debt is usually “proven” and it is essential that some arrangement is negotiated with the creditor if you CAN pay.  If you as business sole trader know you can pay, or if acting as a company director who knows the business can pay, it is best to pay or seek time to pay.If the debt cannot be paid and the company is insolvent under the 3 insolvency tests then it is possible to restructure the debt with an informal time to pay arrangement  If things are looking really difficult and the company has many more creditors, then we suggest considering using a company voluntary arrangement (CVA). Once successfully approved, a CVA can avoid a winding up petition being issued.A CVA is an effective restructuring method which gives the business some breathing space. If 75% of the creditors agree, the unsecured creditors are bound by a CVA to accept a payment of a proportion of the debt over a 3-5 year period.Remember, a winding up petition can be issued just 21 days after the service of a statutory demand. It is therefore essential to ACT without delay. A winding up petition once advertised can have a devastating effect on the company as the bank account could be frozen.Likewise, if you are a sole trader then a statutory demand can have a devastating effect on your livelihood IF it is not dealt with. Bear this in mind, the sooner you get help the more time we have to help you. Do not wait until a petition is issued, as then it may be too late.Call and talk to us as we can help! Call us on 0800 9700 539.

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What is a Statutory Demand?