5 Effective Ways To Safely Recover Debt From Limited Companies
Discuss mutually, hire a solicitor or debt recovery agency, take court’s help or statutory demand to effectively recover debt from limited companies.
Paying a debt can impose lots of adverse effects on your business. Starting from the cash flow problems to the arduous journey of chasing the debts can cost you extremely in terms of time & money.
Limited companies are getting attention from many established or profound business people these days. The point of attraction of a limited company is the debt holder’s liability which depends on the shareholding. So, the person responsible for the delinquency may not have to pay the total sum of the debt. It may sound unfair, but if the responsible company is wound up completely, it may become impossible to hold those persons liable.
But don’t worry. You still have options to enforce and reclaim the debt. Following are the best ways to recover a debt from a limited company-
1. Try To Solve Mutually With The Debtor
It’s always advisable to avoid heated arguments or the threat of legal actions at the beginning. The best way of solving such issues is through discussion.
You can address your issue briefly to them. Make an appointment or visit the debtors to discuss the next steps to reclaim your debt.
For further information, you can provide the details of the debts, the persons responsible, and the issuing date, etc. You should provide written letters or documents regarding the debt.
However, if you fail to reach any conclusion regarding the debt, don’t threaten the debtors immediately about taking legal actions. It’s costly & time-consuming.
2. Avail A Mediation Service
Mediation service works as a third party to address the issue on both party’s behalf. He provides the possible solutions the debtor should undertake. Besides clarifying the issue, he further considers the debtor party’s case & maps out a foreseeable plan.
Taking the help of mediation service is less stressful & cheap. You don’t need to go through the hassles of court hearings & other legal actions.
3. Contact A Reputable Debt Recovery Agency
A debt collection agency is another effective option to consider. These agencies have their professional solicitors who will help you with the debt.
These companies work as a solicitor. But to contact a solicitor, you may not find the best one often. Here, the debt recovery agency comes to aid.
They have a wide range of experts & huge experience in dealing with such cases. They are reliable and act as your financial consultant.
In terms of fee, they may charge you a fixed amount or take up a percentage of your retrieved money from the debtor.
4. Hire A Solicitor
A solicitor is a specialist who specializes in debt recovery processes. You need to pay a fixed amount to avail of a solicitor’s service.
Upon hearing your acquisitions of the debt, the solicitor will write a letter addressing the severity of the issue to the debtor. These letters also contain legal actions that you can take against the debtors.
Usually, when debtors receive a solicitor’s letter, they take action to quickly repay you. A solicitor can point out if any visible loopholes are there about the debt. With the solicitor’s help, you can get a clear picture of how to proceed against the debtor.
5. Take Formal Actions
If being friendly & polite didn’t work for you, you should consider taking formal actions against the debtor. There are three steps by which these legal actions work:
Step 1. Letter Before Action (LBA)
Letter before actions is a letter issued by a professional solicitor about the debts & the debtors’ forthcoming legal actions. This is the final warning & an attempt to solve the issue by not going to the court.
Giving respect to your clients, an LBA is issued. However, if they don’t respond timely to this LBA, then legal proceedings start.
A solicitor is solely responsible for issuing an LBA. It usually has a significant impact on the debtors unless they don’t want to co-operate.
Step 2. Research
If the debtors didn’t reach out to you even after receiving the LBA, you need to assess certain factors like their capability to pay, cash flow info, or if there are other legal proceedings they are going through, etc.
First, be sure about their legitimacy of being a limited company. They can be a sole trader but put the brand name at the top of their stationery to act as a limited company.
Also, you need to check if they are still operating business endeavors or not. If they are still trading, there’s a good chance for you to reclaim your debts.
Assess their information, cash flow issues & other related factors to make a judgment. You can find this info on many legal sites. So do your groundwork thoroughly.
Step 3. Legal Proceedings
The last stage is to take legal action. You can proceed in the following ways-
1. County Court Proceedings
The county court issues an order to the debtor company about the debt & gives them 14 days. If they do not acknowledge, the verdict goes in your favor & you get the debt owed plus interest.
If they respond & dispute the amount, the court holds legal hearings & then gives the verdict upon both parties’ evidence. You will not receive any payment if you lose the case.
2. Statutory Demand
It’s an alternative option for you to consider. Here the court gives the debtors’ notice of 21 days. If they fail to repay the debt within that time, they can face liquidation. Hence, debtors take a statutory demand notice seriously.
However, before trying this option, contact a solicitor. He can help you take the right course of action depending on the debtor’s capability, the company’s solvency, cash flow issues, etc.
3. Legal Actions
If the debtor doesn’t cooperate upon the county court order, a High Court Writ of Control is issued. You can get two types of results-
Once the debtor’s property gets sold or re-mortgaged, you get paid or the debtor’s bank pays you the amount upon court order. This will help you recover your debt and get a fresh start.
Consider the above steps and options to recover debt from limited companies in the safest way.