COVID-19 & Recovering Outstanding Debts

As the world continues to react to the impact that the coronavirus pandemic has on the global economy, businesses prepare for an extended period of reduced operation and remote working. Cashflow is always a huge consideration for any organisation, in this unprecedented situation it is more important than ever that your business is limiting outstanding debts as much as possible.

We continue to operate our debt recovery service remotely and the courts are holding hearings by telephone conference. Although it is not accurate to state that it is ‘business as usual’ for many businesses, it is still possible – and advisable – to pursue debtors in this environment.

Both creditors and debtors are already facing a slowdown in operations with several businesses either furloughing or laying off workers or closing their doors permanently. It goes without saying that flexibility and communication is key when attempting to reclaim outstanding debts in the current climate.

Should you pursue debtors for outstanding debts in the current climate?

With the inevitable struggles that many businesses currently face – either those operating remotely or those operating at a reduced capacity – it is important that you act decisively. Cashflow is obviously crucial for your business in this prolonged period of uncertainty, and reducing the amount of outstanding debts gives you the best possible chance to survive. It is also frequently the case that debtors have sufficient assets to pay the debt they owe but are unwilling to repay the outstanding debts.

Pre-legal or legal debt recovery?

It is usually the case that pre-legal means of debt recovery is sufficient in most matters. In the current climate it is important to consider that pursing recovery through the courts can protect your business if debtors are liquidated as a result of the slowdown in the economy through means such as a charging order.

If you have debtors on a repayment plan that they are no longer able to maintain, it is also important that aby change to this is supported by the relevant legal documentation in order to protect you in the future. Taking the time to take these steps now ensures that all parties know where they stand, gives you legal protection of your interests, and significantly reduces the chance of litigation in the future.

Failure to fulfil contractually agreed payments

In such uncertain times it is crucial that you maintain clear and solution-driven communication with business partners. Many in industries such as the hospitality sector will find that they are unable to fulfil contracts in the short term, in these circumstances it may be possible to renegotiate terms to allow the fulfilment of the contract at a later date or with amended terms.

If this is not possible, you may find that debtors look to enact force majeure clauses in commercial contracts. While this is a legally complex area it is important to note that debtors do not have a de facto right to rely on force majeure. In this instance it is important to seek legal advice to understand how this would apply to your specific scenario.

Next Steps

Spratt Endicott’s experienced Debt Recovery Unit continues to offer pragmatic advice tailored to the needs of our client. We act with discretion and consider the needs of your business,   the importance of the relationship with the debtor, and the associated costs with each course of action, and advise our clients on the most effective means to recover their debts.

In such uncertain times we ensure that our clients are in the healthiest position to protect their business for the future.

Contact Richard Gwynne to discuss how the Debt Recovery Unit can help your business on rgwynne@se-solicitors.co.uk.