Is your plaintiff or defendant part of more than half of UK companies with ‘toxic debt’?


A recent analysis by Begbies Traynor shows that more than half of UK businesses have ‘toxic debt’ that they may struggle to pay off in the next 12 months. What if the business that you plan to pursue, or that is suing you, is one of them?

Potential claimants should consider the defendant’s ability to pay before initiating proceedings. Otherwise, they could simply add unpaid litigation fees to the amounts owed to them. If the defendant company becomes insolvent, a judgment debt will not be greater than any other unsecured debt it owes. Think about what you know about the business: are there any warning signs that it might be facing financial trouble? You can check the Insolvency Register to see if the business has been made insolvent, and The Gazette to see if insolvency proceedings have been initiated against it. You can get an idea of ​​a company’s financial health by looking at its latest accounts, but these may be out of date, or for new businesses, they may not have filed accounts yet. Depending on the type of loss, the company may be insured against it. You can search the Land Registry for a list of all properties owned by a business and see if there are any secured debts on them.

If you decide not to sue because the risk of non-collection is too great, remember that you may be able to sue later if the defendant seems in better financial shape – for most claims you have six years from the date of termination of the contract. , or the date you suffered harm as a result of a wrong they did to you, to initiate proceedings (although there may be a shorter contractual period). The downside is that the evidence for your claim will be less recent and may be more difficult to gather, which could affect your ability to present your case.

If you are a defendant in a lawsuit and you believe that the plaintiff company is in financial difficulty, then ask yourself if you can prove that there is reason to believe that it will not be able to pay your fees if ordered to do so. If this is the case, you may be able to obtain security for costs, that is, when the court orders a plaintiff company to pay the court an amount as security for the costs it owes. pay you if you were successful in defending yourself. A successful warranty claim can often mean the end of the claim.

Small businesses in the UK are seeking advice on ways to escape dangerous levels of debt accumulated in government guaranteed loans during the Covid-19 pandemic, with some considering prepack administrations.

Begbies Traynor, the listed restructuring company, said its analysis showed more than half of UK companies had “toxic debt” that they might struggle to pay off over the next 12 months.

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