Businesses face more barriers to getting paid
New rules introduced on 1 October 2017 will make it more difficult for businesses to chase down payment from individuals and sole traders. More information has to be provided and more time allowed before court action can be taken. If not, the court can penalise the business in a number of ways increasing pressure on cash flow.
Who has to follow the new rules?
Any business creditor meaning a sole trader, partnerships, LLPs, companies and public bodies
Which debtors do the new rules apply to?
Individuals and sole trader debtors only
What does a business creditor have to provide to the debtor?
- A letter of claim providing specified details, sent by post
- A template information sheet
- A reply form
- Statements of account and/or Financial Statement form
How much time does the debtor get?
- 30 days from the date of the letter of claim – if no reply, court proceedings can be started
- If the debtor replies, court proceedings cannot be started for at least 30 days from receipt of the reply
- Debtor can request more information/documents
- If the debtor suggests alternative dispute resolution this must be considered
- Creditor must give the debtor 14 days’ notice of starting court action
What happens if you don’t follow the rules?
The court can penalise you by
- Delaying payment even more by halting the court action until you comply with the rules
- Limiting or denying you any interest on the debt
- Limiting or denying you any legal costs from the debtor even if you win or even worse the court can order you to pay the debtor’s costs
What to do next
If you have customers who are consumers or sole traders, you may want to review the credit you offer to those customers and tighten up your recovery processes. The success of threats of immediate court action must be balanced against the risk of being penalised for flouting the rules.
If you would like help in meeting this new challenge, please contact our Dispute Resolution team on 0161 926 9969.