Hodgsons offer first class advice to creditors and help you take the most effective route forward to gain your money back before such losses begin effecting your own cash flow.
Chances are, at some point in the life of your business, at least one customer is going to fold owing you money.
The first stage is realising that you need to take action. If you're reading this, you have probably reached this point. Seeking professional advice is now a must and in many cases, creditors will feel most comfortable talking with a familiar figure, such as their accountant or lawyer, before taking any formal action.
Trade creditors (also known as unsecured creditors) usually rank behind every other class of creditor in the distribution of a failed company's assets. Top of the list are secured creditors, who hold security over a debtor's assets in the form of a charge (also referred to as a mortgage or debenture).
Security over a debtor's assets can only be held by prior agreement which may be classed as a fixed or floating charge. Even secured creditors will only get their share of the assets after the costs of realisation and professional fees have been met. If there are any funds left after fixed charge creditors have been paid, then the preferential creditors turn to be paid out.
Since 2003, only employees' arrears of wages and holiday pay (to specified limits) are considered as preferential creditors. Floating charge creditors (secured creditors) will then be the next in line, whilst unsecured creditors will be entitled to a percentage of the floating charge creditors distribution (to specified limits).
This change means that unsecured creditors, whilst previously last in line for remaining funds, are now more likely to get something back.
As for shareholders, they are entitled to anything that's left after everyone else has been paid - but a payout to them is incredibly rare.
If you suspect that your customer is going to leave you with a bad debt, Hodgsons may be able to investigate this for you and advise on suitable action to protect your interests.
If you have been made aware that your customer is insolvent, we will represent you at a meeting of creditors, free of charge. It is important that you are correctly represented so that nothing is agreed that may be to your detriment. We will provide you with a report of the meeting, normally including an indication of the likelihood of a dividend payout.
If you are asked to vote on a Company Voluntary Arrangement (CVA), you may be tempted to vote against it purely because you have been badly let down. Think twice - the proposal will only have been put forward if an independent insolvency expert believes it has a good chance of success. It will also usually offer you the opportunity to get back a great deal more (especially if you are an unsecured creditor) than in other insolvency procedures. However, if you would like independent advice about the viability and other modifications that may be made to the proposal, Hodgsons will provide this service free of charge. Finally, it is important to understand that a CVA will keep someone in business who still needs your product or service - even if you insist on cash on delivery in future.