CreditHub: UK

• Open to public ownership.
• Shareholders' liability limited to their investment.
• Minimum share capital of £50,000.

A public company whose ownership is open to the public. Shareholders are liable only up to their investment amount. The company must have a minimum share capital of £50,000 before starting business.

Ideal for businesses seeking public investment and higher credibility.

• Not open to public ownership.
• Owned by a small group of shareholders.
• Liability limited to investment amount.

A private company not open to public ownership. It is owned by a small group of shareholders with liability limited to their investment. Commonly used business structure.

Suitable for small to medium-sized enterprises with private ownership.

• Created by the monarch.
• Not common in day-to-day business.

Companies or organisations created by Royal Charter granted by the monarch. Not commonly used in typical business operations.

Relevant for historic and prestigious institutions.

• Unincorporated business with one owner.
• Owner is liable for all business debts.

An unincorporated business with a single owner who is liable for all debts and obligations. The owner's personal property can be used to cover business debts.

Simple and inexpensive to set up, but with unlimited liability.

• Available at Companies House.

Corporate information can be found at Companies House: www.gov.uk/government/organisations/companies-house.

Access basic corporate information easily online.

• Financial state information available.
• Provided by Companies House and private agencies.

You can obtain information on the financial state of affairs for companies and industry at Companies House. There are also numerous private reporting agencies offering credit checks.

Utilize credit checks to assess financial health of potential clients.

• Credit reports provide judgment information.

Normally you can obtain judgment information as part of a credit report from private reporting agencies.

Check for any legal judgments against potential business partners.

• Necessary documents for legal proceedings include invoices, statement of account, contracts, and communication records.

In order to begin legal proceedings, you will need:

• Copies of the invoices
• Copies of the orders, order confirmations, and delivery notes
• Copies of the general conditions of sale should there be any

As proceedings continue, you may require additional documentation, such as copies of contracts, orders, confirmations, and delivery notes.

In case of dispute, all the notes of the conversations between you and your debtor via letter and email should be kept. In the case of oral negotiations, you may require meetings or notes about what was agreed.

Maintain detailed records and documentation for legal proceedings.

• Provides security against buyer's default or insolvency.
• Two types: Simple and All Monies.

When included in trade contracts, retention of title allows the seller to retain ownership over the goods supplied until certain contractually defined conditions are met, providing the seller with a form of security against the buyer's default or insolvency.

• Simple: Title passes to the buyer upon payment for each invoice relating to the goods.
• All Monies: Title passes to the buyer only when they have paid for all the goods supplied.

Use ROT clauses to secure ownership of goods until payment is received.

• Warning notice is mandatory before filing claims.
• Notice should include claim details and payment instructions.

A warning notice to the debtor is mandatory before filing any enforcement claims. The warning notice should include:

• The name of the creditor and the basis of the claim
• The total amount of the claim, including any penalty interests
• Payment method required
• A warning that the claim will be enforced through the enforcement authority in case the claim is not settled by the required date
• Information on how to dispute the claim

If this measure has been taken and the payment still has not been made after the two-week notice period (according to the law), the creditor may file for enforcement.

Send a warning notice before taking legal action.

• Interest charges must be outlined in terms and conditions.
• Collection costs not chargeable unless specified in contracts.

The Late Payment of Interest Act assists businesses faced with late payment problems. This legislation applies only to commercial debts between businesses, commercial entities, or public sector organisations. Interest is claimed at the prevailing Bank of England rate plus 8.0%.

Additionally, you may charge an amount to compensate for the costs of collecting late payment. The amount of compensation that can be claimed is determined by the outstanding amount:

• Up to GBP 999.99: GBP 40.00
• GBP 1000.00 – GBP 9999.99: GBP 70.00
• Over GBP 10000.00: GBP 100.00

Ensure terms and conditions specify interest and collection costs.

• General limitation period is six years for simple contract debts.
• Limitation period can restart with payment or written acknowledgment.

In the UK, for simple contract debts, the general limitation period is six years, starting from the original due dates of the debts. This means that the courts will not hear actions for payment if the debts are outstanding for more than six years. Legal action on such debts is barred by the statute.

However, if the debtors either make payments or acknowledge the debt in writing, the limitation period may start again. Whether such an acknowledgment constitutes sufficient evidence of the debts to restart the limitation period is determined on a case-by-case basis.

Understand the limitation periods to ensure timely legal action.

• Includes arbitration and mediation.
• Arbitration is widely used in commercial disputes.
• Expert determination for specific disputes.
• Tribunals provide affordable ADR mechanisms.

There are a number of dispute resolution methods used in the UK, including arbitration and mediation. Arbitration is widely used in commercial disputes.

In some instances, the parties will have agreed to refer any disputes arising for expert determination. The independent expert is appointed by the parties to investigate and deliver a binding opinion on the issues in dispute.

In addition, there are a number of tribunals in each jurisdiction which have been established to deal with disputes in a specific area and provide affordable ADR mechanisms.

Understand the available ADR methods and their applicability.

• Statement of claim must be filed in the jurisdiction where the debtor is registered.

To begin court proceedings, a statement of claim must be filed in the jurisdiction in which the debtor is registered. Such a statement provides the details of the debt and the necessary instructions for the debtor to either settle or appeal against the claim within 28 days of reception.

Ensure the statement of claim is filed in the correct jurisdiction.

• Debtor has 28 days to settle or appeal the claim.

If the debtor neither appeals nor settles the debt within 28 days, then a judgment will be issued.

Monitor the debtor's response within the 28-day period.

• Application requires an affidavit and legal representation.

An application for a default judgment in a claim is executed through the filing of a motion including an affidavit and a legal representative of the creditor’s company. The affidavit must be filed within 14 days of the notice.

Prepare necessary documents for default judgment application.

• Judgment enforceable for up to 12 years with interest.

A judgment may be enforced for up to 12 years following its issuance, including an accrual of interest.

Understand the long-term enforceability of judgments.

• Handled in the Supreme Court, must be lodged within 28 days.

Any appeals in local court proceedings are addressed in the Supreme Court which can result in increased costs. Appeals must be lodged within 28 days from the date of the decision unless otherwise stated by the court.

File appeals promptly within the 28-day window.

• Standard legal proceedings may take between ten and sixteen weeks.
• Appealed cases could take one year or longer.

Standard legal proceedings may take between ten and sixteen weeks. However, any court procedure in which the debtor has filed an appeal, could take one year or longer.

Plan for potential delays if the debtor appeals.

• Costs vary by state and are a percentage of the principal debt value.
• Summons: GBP 400 – 1,800 in filing fees, 500 – 1,700 in solicitors’ costs.
• Judgment: GBP 300 – 750 in lawyer’s costs.
• Enforcement: GBP 500–1,000 for various orders.
• Bankruptcy/Winding-up: GBP 8,000 – 10,000.
• Supplementary costs may be added to the principal debt.

The state in which the proceedings take place determines the overall cost which is generally executed as a percentage of the principal debt value.

• Summons: GBP 400 – 1,800 in filing fees, 500 – 1,700 in solicitors’ costs.
• Judgment: GBP 300 – 750 in lawyer’s costs.
• Enforcement: GBP 500–1,000 for a garnishee order, an examination notice, or a writ for the levy of property.
• Bankruptcy/Winding-up: GBP 8,000 – 10,000.

Whenever legal action is executed via the courts, the law permits a supplementary amount to be added to the principal debt to cater for the extrajudicial interest and costs charged by the courts. Often the debtor will only pay the principal amount and the judge will assign such extra judicial charges either, wholly to the creditor, or split between the parties.

Budget for the costs associated with court proceedings.

• Issued by the court to recover debts from debtor's income.
• Can target bank accounts, wages, or those owing money to the debtor.

A garnishee order is issued by the court and permits the creditor to recover debts through any form of income the debtor has. This includes directly from the debtor’s bank accounts, portion of wages, or those owing money to the debtor. The person the order is addressed to is known as the garnishee.

In general, garnishee orders are not always successful as they have strict requirements and are often rejected due to incorrect details.

Understand the requirements and limitations of garnishee orders.

• Used to gather information about the debtor’s financial situation.
• Requires filing a motion at court.

When unsure about the debtor’s financial situation, the debtor can be asked to provide more information via an examination notice or an examination order. Such an action helps to clarify the debtor’s financial position and exactly what assets sit under the debtor’s ownership.

Upon filing a motion at court (for a fee between GBP 400 – 600), the debtor (or their director) is served.

Use examination notices to clarify the debtor's financial position.

• Writ for the levy of property allows seizure and auction of assets.
• Debtor may settle debts or appeal upon sheriff's arrival.
• Various fees incurred based on sheriff’s actions.

A writ for the levy of property is an order for the sheriff or bailiff to seize and auction moveable assets under the debtor’s ownership. The cash proceeds for any sale of assets are first used to settle the costs of the enforcement, with any residual funds distributed to the creditors to clear the outstanding debt.

Should the debtor decide to settle the debts immediately upon the arrival of the sheriff, they may make an instalment application to the court, or indeed appeal against the outstanding value.

The following fees are incurred based on the sheriff’s actions:

• GBP 100 for each in-person visit to a debtor’s premises.
• GBP 75 for the auction of seized assets with an additional 3% levy on the funds raised at auction.
• GBP 500 for the towing of a vehicle belonging to the debtor.
• Additional fees for the removal of large goods, such as heavy machinery may also be incurred.

Be aware of the costs and procedures for enforcing judgments on movable property.

• Access to real estate assets through bankruptcy or liquidation.

In the event whereby the debtor owns real estate, the creditor may only access such assets through the bankruptcy or liquidation of the debtor.

Understand that real estate assets are accessed through bankruptcy or liquidation.

• Debtor may apply for bankruptcy with an outstanding debt of at least GBP 5,000.
• Bankruptcy notice requires settlement within 21 days.
• Licenced trustee controls debtor’s property upon bankruptcy.
• Creditors must lodge a proof of claim.
• Cost of bankruptcy may exceed GBP 8,000.

The debtor may apply for bankruptcy when there is an outstanding debt of at least GBP 5,000 which cannot be repaid. Firstly, the debtor must be served with a bankruptcy notice requiring the debtor to settle debts within 21 days. Should there be no appeal or settlement, creditors may lodge a bankruptcy petition to the Federal Magistrates Court.

Once declared bankrupt, a licenced trustee is granted control of all of the debtor’s property. At this point, the creditors must then lodge a proof of claim with the relevant documents and evidence to the trustee for confirmation of the debt.

The cost of bankrupting the debtor may cost over GBP 8,000.

Understand the process and costs associated with bankruptcy.

• Creditors must prove debtor's insolvency.
• Statutory demand issued to the court and notified to the debtor.
• Application for winding-up order if debt not settled within 21 days.
• Proceedings under Section 459P of the Corporations Act.
• Liquidator appointed upon court order.
• Creditors may receive dividends if funds are available.
• Legal costs paid through dividends before creditors receive settlement.
• Insolvency proceedings may last several years.

To wind-up the debtor company, the creditors must prove that the debtor is insolvent and unable to pay debts as they fall due. The creditor should issue a statutory demand to the court which is to be notified to the debtor. If the debtor does not appeal, or settle the debt within 21 days, the creditors can file an application for a winding-up order. Such a method should only be explored as a last resort.

The process of issuing the proceedings is brought under Section 459P of the Corporations Act. If the hearing for the application of winding-up of the debtor results in the court agreeing that the debtor should be wound up, an official order will be notified, and a liquidator appointed.

Upon conclusion of the proceedings, all creditors with confirmed debts may receive dividends if there are any funds to be divided.

The legal costs incurred by creditors to file for the winding-up of the debtor must first be paid through dividends before the creditors receive any residual settlement.

Insolvency proceedings may last several years and are subject to the case type, principal debt value, and the availability of the parties involved.

Understand the winding-up process and its implications.