Customer in Liquidation

[griffgrog]

A customer of ours has gone into liquidation owing us a significant amount of money. Our credit insurance only covers a small proportion of what's owed. Am I right in thinking that the chances of getting any money back from the IP are virtually nil?

We've traded with this company for many years and I'm personally very good friends with the owner. He's told me that when he resurects the business he will pay the money back - he considers that the loan still stands. I think that's a very generous statement as he has no legal obligation to pay it back.

I know that the business is viable, it failed due to the current economic circumstances - carrying too many fixed overheads to react to the situation.

What can you do to resurect these types of businesses? The only way we can get any of our money back is to help them start again and trade through it. Has anyone done something like this before?

GG

[M-J-B]

In 13 years of trading we've only had five bad debts totalling about £20k on a T/O of over £10m+ (james28Uk has collected two recently for me with success btw ) and I remember 2 in particular where the debts from memory were £7k and £6k respectively.

Both parties I knew well, got on with and had a good 'business' relationship. Rather than chuck my toys out of the pram after being told they would pay me back, I let them get on with it.

Both paid their debts in full within 3 months from their own pockets and I have a tremendous respect for them as good honest people. I think you will find that it's illegal for a company to pay a previous companies debts either in goods or £'s (although I stand to be corrected on that one), so I would suggest you try and help as best you can, at the same time don't expose yourself to anything more that you can't afford to loose (just in case)

Good luck either way.

[griffgrog]

Thats exactly the stance I was going to take. I realise that there may be implications for one company paying the debts of another. In these circumstances, our terms state that the supplied product remains our property until paid for. As any new company created will need these products, we will just be recovering and then reselling them. What we had supplied was fundamental in their business production processes. These people are good honest types and I have no doubt that when they have the means to pay they will.

[M-J-B]

Has your customer kept the goods you sold him or has he sold them on?

[skwdenyer]

griffgrog said:

Thats exactly the stance I was going to take. I realise that there may be implications for one company paying the debts of another. In these circumstances, our terms state that the supplied product remains our property until paid for. As any new company created will need these products, we will just be recovering and then reselling them. What we had supplied was fundamental in their business production processes. These people are good honest types and I have no doubt that when they have the means to pay they will.

You need - quickly - to inform the IP that there is a retention of title issue with the goods you have supplied; they will not read all the Ts & Cs to find this out, although they should have mentioned this in any correspondence they have had with you. You can then recover your goods if you like and, if you prefer, re-sell them to "newco".

[skwdenyer]

M-J-B said:

I think you will find that it's illegal for a company to pay a previous companies debts either in goods or £'s (although I stand to be corrected on that one), so I would suggest you try and help as best you can, at the same time don't expose yourself to anything more that you can't afford to loose (just in case)

AFAIK there is no legal bar on one company paying this way, so long as it is arranged properly. Basically if "newco" wants to buy goods from you, you simply invoice them for their first order and include on it the amount owed from "oldco" by way of a price increase for the new goods. You make that a condition of trading with "newco", and away you go. That arrangement is very common - "if you want to continue to trade with me then you must cough up".

[skwdenyer]

griffgrog said:

A customer of ours has gone into liquidation owing us a significant amount of money. Our credit insurance only covers a small proportion of what's owed. Am I right in thinking that the chances of getting any money back from the IP are virtually nil?

We've traded with this company for many years and I'm personally very good friends with the owner. He's told me that when he resurects the business he will pay the money back - he considers that the loan still stands. I think that's a very generous statement as he has no legal obligation to pay it back.

I know that the business is viable, it failed due to the current economic circumstances - carrying too many fixed overheads to react to the situation.

What can you do to resurect these types of businesses? The only way we can get any of our money back is to help them start again and trade through it. Has anyone done something like this before?

GG

1. Are you the largest creditor of the business? If so then you might want to consider bidding for the assets, then selling them on to the old Director, that way turning a profit (since you'll be getting back a large percentage of what you pay for them). Just a thought See Smolenski & TVR for an example...

2. Out of interest, why were you trading so far outside your credit insurance cover limits? Do you do that a lot?