Why waiting too long to seek help could spell the end for your company.

With the end of lockdown and the COVID 19 Pandemic restrictions at the beginning of 2022, we are now seeing a return to the pre-pandemic standard enforcement actions taken by creditors to recover their debts. The current economic conditions mean that as many businesses are struggling, recovering the sums that are owed to them has become a priority, with solicitors seeing an upturn in work in relation to debt recovery.  If your business has noted creditors becoming more aggressive in pursuing their debts, it is important that you try to seek agreement before the involvement of the courts. In particular, if you have been served a demand letter by Sheriff Officers, this should be taken with the utmost seriousness as the appointment of a Provisional Liquidator could spell the end of your company.

What happens if I receive a demand letter?

Unfortunately, many business owners have a tendency to ignore legal letters of demand and threats of legal action, viewing these as just another stage in payment negotiations. However, if a served demand letter is ignored, the creditor can petition for the company to be wound up, and the petition may include a request that the Court appoints a Provisional Liquidator – an Insolvency Practitioner who is appointed as an Officer of the Court in the period between the petition being lodged and either an Interlocutor being granted to wind up the company or the petition being dismissed. If this request is granted, it is likely the first you will hear about it will be when a member of the Provisional Liquidator’s staff arrives at the company’s trading premises – the statutory requirements mean notice is only lodged at the company’s registered office.

What are the powers of a Provisional Liquidator?

While a Provisional Liquidator’s powers are limited, their general duty is to safeguard the assets of the company to avoid the dissipation of these assets and the worsening of the financial position of the company in order to protect the creditors. Very often, there will be no option but to shut the company down if the continued trading of the business will make matters worse in the short term, irrespective of the long-term prospects of the business.

What do I do next?

It is critical as a business owner that you seek advice from a professional if creditor pressure is beginning to build – we can advise on potential solutions or other legal measures such as lodging caveats. Waiting too long could mean the next knock on your door is the last before it is closed permanently. Click here to get in touch today.

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