So how do we navigate this minefield?
There are a multitude of options available but in this time of crisis acting quickly will inevitably be key to the client knowing where they stand. Clients will need to know whether the debt is disputed. If it is not, and the client is simply being ignored, then threatening a winding up/bankruptcy petition (or taking steps to take that route) will be a real possibility. There may be wider reputational/ongoing relationship issues to consider - and there can be serious consequences for taking such action - so that is not a one-size-fits all approach.
If the debt is genuinely disputed then time will not be on the client’s side – it is unlikely to be resolved quickly without negotiation but there could be mutual benefits for dealing with it now rather than later. In that instance the question will be how to bring the debtor to the table and - whilst it would not be a quick process – there are ways to do that. Otherwise issuing proceedings without further delay may be the way forward. The value of the claim and the costs of bringing it will need to be assessed to see whether it is worth investing the time and money or whether it is a question of cutting losses and moving on. If proceedings are necessary the client is looking at a 18 month to 2 year time period to conclusion of trial which may be unacceptable – this may be delayed further if the Court’s begin to close. We are familiar with these commercial and practical judgments – it is not just the legal position which is important.
In either instance is there a risk that the directors can see that trouble is ahead and are wrongfully dissipating assets (potentially moving them into their own connected companies or into their spouses names)? If the client has an valid underlying claim, such as an unpaid debt, and they need to urgently protect the debtor’s assets then they will need to consider obtaining a freezing injunction. This is obviously a serious step and action which should not be taken likely. It will, however, be appropriate in certain circumstances and should not be overlooked. An order may be obtained urgently to protect the status quo and potentially to bring the debtor to the negotiating table. The underlying claim would still (usually) need take its ordinary course but it would protect the assets in the meantime.