As per Graydon UK, company liquidations rose by 12% between April and June 2008 and there was little change to this rate in the following months. With this figure being so high, the chances are that most businesses will be affected by at least one of their debtors going bust in the current economic climate. If your lucky, the liquidation may result in the creditor receiving a few pennies in the pound This can be very hard to take, especially if the debtor has made countless promises of payment prior to the liquidation.
However, help is at hand in the form of the little known Company Directors Disqualification Act 1986. This states that if the director knew, or ought to have known, that the company was continuing to trade whilst insolvent the court may (following an application by the liquidator) order them to make a personal contribution to the creditors. Of course, some firms go bust and it is through no fault of the directors. if, however you feel that they were making promises they knew they couldn't keep then you should take action in an attempt to recover your money and to stop the dishonest director from doing it again.
In the case of Northern Rock, the lawyers and accountants found 'insufficient grounds to proceed with any legal action for negligence' against the directors who had been in charge at the time of the collapse. However Northern Rock have already paid back 57% of the £26bn owed which is more than can be said for most company's going through liquidation.
If you are concerned about the financial stability of one of your clients due to repeated failed payment promises, get the promise in writing (email is sufficient) and from a director. If they won't provide it, that's a huge red flag and it may be worth speaking to a debt recovery agent sooner rather than later.
Jamieo "Making Your Cash Flow" (Article courtesy of Eleanor Bateman of Bateman's)
