Commercial Debt Recovery
Outstanding debts such as an unpaid invoice can be crippling for small businesses, but debt recovery also has to be efficient so as not to deplete further resources chasing after debt. We at Merchiston Solicitors offer a commercial debt recovery service that is designed to be effective. The range of services we offer includes:
- Letters before action;
- Arranging commercial mediation;
- Issuing debt recovery proceedings;
- Judgement enforcement; and
- Winding up petitions.
Letters Before Action
The Civil Procedure Rules (CPR) 1998 and Practice Direction on Pre-Action Conduct require that the party seeking to recover a debt issues a letter before action (LBA) or what is normally referred to as a late payment of debt letter. The CPR prescribes the structure of the letter. We would assist by drafting a LBA and can do this on a fixed fee basis, subject to complexity of the matter, and demand settlement within an appropriate timeframe.
Upon receipt of the LBA the debtor (the person owing the debt) then has 14 days to respond either acknowledge receipt of the LBA, or may wish to offer a full reply. If the debtor acknowledges the debt and does not reply fully to the LBA, he will have a further 14 days to respond, otherwise you can escalate the matter to the appropriate court.
Late Payment of Commercial Debt
The Late Payment of Commercial Debts (Interest) Act 1998 allows businesses to recover (from other businesses) interest, which is fixed sums in respect of their debt recovery costs. However, this Act does not apply when recovering from private individuals.
It is designed to reimburse businesses for the cost of instructing a solicitor, sending letters or making phone calls in an attempt to pursue the outstanding debt. We will advise you on this and on contractual interest and statutory interest that may also be applicable, and on the costs associated with the recovery of the commercial debt.
Alternative dispute resolution (ADR) such as mediation plays a vital role in resolving disputes outside courts and although it is not compulsory the CPR penalises a party unreasonably refusing to enter into ADR by allowing the judge to order the defaulting party to pay the other party’s legal costs.
We can outline your options to you, propose and arrange referring the matter to commercial mediators that have a wealth of experience in mediation of this nature. They will narrow down the issues and encourage parties to make concessions and come to an out of court settlement on the debt and draw up a settlement agreement, which will be legally binding.
Debt recovery proceedings
In the event that ADR does not work or a party does not comply with the request for ADR, we can assist by issuing proceedings at the right court, which depends on the sum you are trying to recover. If below £10,000 it may be heard at the small claims court otherwise it is ordinarily transferred to the County Court. We can advise and represent you throughout this procedure.
Statutory interest on unpaid debts
The Act also gives businesses the statutory right to charge interest on invoices, which remain unpaid after the due date at a rate of 8% above the Bank of England’s base rate. Because this is a statutory right you do not need to include it in the terms and conditions of the supply contract or inform the customer of it prior to the transaction.
Contact Merchiston Solicitors
For further information about debt recovery services or to discuss a matter in more detail, please call 0203 540 6340 to speak to one of our expert solicitors. Alternatively, complete our online enquiry form or email us at email@example.com