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What if your clients will not pay?

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Despite best efforts by businesses to implement credit management policies and efficient collection methods, some customers just will not pay up.

Sadly, some businesses find that despite going to the expense of winning a judgment, the debtor still refuses to acknowledge calls or letters.

It is advisable to check the credit worthiness of the debtor, since non-payment could be an indication of financial difficulty. if the debtor cannot afford the payment there would appear to be little point in incurring further costs chasing the debt. The creditor could take enforcement proceedings, they offer no guarantees however.

Ways to make customers pay

Oral Examination. This is an application to court for the debtor to be summoned to court to be examined on oath as to the financial means of the company.

The best person to make the application against would be the person in the company having responsibility and knowledge of the finances.

Failure to attend the examination can lead to imprisonment for contempt. The difficulty for the creditor is in determining whether the debtor is being truthful. The information obtained can be used to determine the most suitable method of enforcement or whether it’s even worth the “powder and shot”.

A creditor could serve a Statutory Demand on the company. This is a precursor to Winding Up proceedings. If the company is solvent, this is more likely to result payment as it is unlikely that the company will wish to be wound up is it is solvent.

Failure to comply with a Statutory Demand is an automatic ground for winding up so if this does not bring about payment; it’s likely the company is insolvent in which case it’s probably not worth wasting the money and issuing winding up proceedings.

A statutory demand is free, save for the cost of preparation. Most Solicitors will have a pre-prepared form which they will simply fill in. Technically, it should be served personally, not by post.