Your legal options for recovering debt

By Mark Hague, Farleys

20 Oct 2022

Company A is owed £50,000 by Company B.

Company B “dithers and delays” in making payment. Promises are made and broken and Company A’s patience rightly wears thin.

Before issuing proceedings, Company A reviews the accounts of Company B. They are solvent, just, with some assets but other significant liabilities.

Should Company A:

  1. Sit back and wait for Company B
    to go bust?
  2. Issue a claim in the usual way seeking a judgment?
  3. Issue either a winding up petition or an administration application?

The court fee for issuing a £50,000 claim is £2,500. Legal fees are likely to be two to three times that amount depending on the complexity of the issues.

Even after issuing the proceedings, there are multiple hoops for a claimant to jump through to obtain a judgment and even once obtained, there are more hoops to jump through to enforce that judgment so the claimant can be paid.

Issuing insolvency proceedings, especially an administration application, can be a much cheaper way of placing the defendant company into insolvency than the usual court route.

The consequences for the directors of a company placed into administration can be personal liability for the company’s debts, so directors will often do all they can, and pay up to avoid the administration order being made.

An administration application isn’t suitable in all circumstances and ought only to be pursued when one of the three purposes of administration can be achieved and it is likely there will be realisations to enable the claimant to be paid.

It is, however, a process which is under used by most practitioners who act on behalf of clients when recovering debts.

Enjoyed this? Read more from Mark Hague, Farleys

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