uk county court procedure

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Legal Actions and Insolvency Allied Factors Limited Delta Credit Manager TM www.alliedfactors.com www.civilprocedurerules.co.uk

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Explains County Court procedure in England and Wales. The process commences with a claim, followed by judgment in default, followed by enforcement. Claim data can be transmitted directly to the Court Service via the CCBC department in Northampton.

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Page 1: UK County Court procedure

Legal Actions and Insolvency

Allied Factors LimitedDelta Credit ManagerTM

www.alliedfactors.com

www.civilprocedurerules.co.uk

Page 2: UK County Court procedure

Aims

• This course aims to give an overview for collection of fixed value commercial debt in England and Wales using the county court

Page 3: UK County Court procedure

Objectives

• At the end of the course, delegates should be able to exercise best practice in the completion of:

• Letters before action

• County Courts Claim forms

• Enforcement procedures

• Awareness of Insolvency Act on actions

Page 4: UK County Court procedure

Pre-action considerations

• It is important that before considering recovery of a debt through the County Court system, a number of areas are considered.

• The County Court will not collect a debt

• The CC will issue an order for the debt to be paid

• The CC provides enforcement measures

Page 5: UK County Court procedure

Proof of debt

Before considering County Court action, the claimant (party owed money/creditor) must be able to PROVE that the debt is owed by the defendant

Page 6: UK County Court procedure

Primary areas of proof

1. Contract

2. Terms and conditions

3. Proof of delivery

4. Paper audit trail

5. Signed credit application form

Page 7: UK County Court procedure

Contract

• Parties to contract

• Timing of contract

• Contract terms

Page 8: UK County Court procedure

Terms and conditions

1. Proof of service

2. Timing of service

3. Prevailing terms and conditions

4. Retention of Title (Romalpa case)

Page 9: UK County Court procedure

Proof of delivery

• Third party considerations

• Valid1. Signature

2. Stamp

3. Quantity

4. Conditions

Page 10: UK County Court procedure

Paper Audit Trail

Full details of all contact between the parties

should be kept.

This includes letters, emails, telephone calls

As these may prove important in disputed

cases.

Page 11: UK County Court procedure

Defendant details

There are three different types of defendants

1. Individual

2. Partnerships

3. Corporations – Limited companies– PLC’s– LLP’s

Page 12: UK County Court procedure

Individual

• Preferably you should have full name identity including gender

• Date of birth

• Individuals are liable to the extent of their personal wealth

• Information via credit reference agencies – CCJ’s, court orders, previous names

Page 13: UK County Court procedure

Partnerships

• Preferably, you should have the full name identity of ALL the partners including gender.

• Partnerships are liable to the extent of the wealth of the partnership assets and the personal wealth of all partners.

• Known as “Jointly and severally liable.”

Page 14: UK County Court procedure

Corporations

• Are liable to the extent of their corporate wealth – and not beyond

• Shareholders are not liable in the event of failure

• Directors are not liable in the event of failure – except they may become liable where it is proven that they have been fraudulently trading whilst insolvent

Page 15: UK County Court procedure

Costs

• The cost of taking action should be considered against the value of the debt and the likelihood of obtaining payment.

• Proceedings will include some or all of the following costs:

1. Court costs.2. Legal costs.3. Administration costs.4. Man hours.

Page 16: UK County Court procedure

Court & Legal Costs

• There are fees for almost every step of proceedings which are recoverable and increase the total judgment debt

• Only solicitors can charge legal costs even if a claimant is taking their own action. Solicitors costs can be subject to a sliding scale and Judge’s discretion

Page 17: UK County Court procedure

Admin & Man Hours

• Includes chase letters, reports, phone calls – consider in relation to size of debt

• Disputed/defended cases where Court attendance may be required can cause a disproportionate use of time in reation to debt size.

Page 18: UK County Court procedure

Previous Collection History

• A file of Claimant/Defendant contact must be kept.

• Your system should promote settlement from the outset to avoid defended matters going to Court.

• The Court will expect to see that offers of settlement (in whole or part) have been made by both parties.

• There must be good commercial reasons to proceed to trial in disputed cases.

Page 19: UK County Court procedure

Unresolved queries

• Every effort should be made by both parties to resolve queries prior to action.

• Evidence of attempts to resolve may be required• Proceed to Court on a disputed case only after

assessing:-

1. Value of the debt

2. Likelihood to succeed

3. Commercial viability

Page 20: UK County Court procedure

Excuses (1)

• We are in the middle of an audit/payroll run

• The cheque signatory is on holiday

• The computer says no

• I moved address and lost my cheque book

• We’re not paying because you put our company on stop for non-payment

Page 21: UK County Court procedure

Excuses (2)

• I’ve been hit on the head with a hammer

• We can’t be overdrawn; we still have cheques left

• My dog has swallowed a fish hook

• I posted it but a firework was put in the post box

• I haven’t got a pen

Page 22: UK County Court procedure

Response to Contact

• Can indicate likelihood of a defence

• Can provide information re: debtor’s finances

• Good information can be vital in proving the debt and assist in the enforcement process

• Identify can’t pay from won’t pay

Page 23: UK County Court procedure

Credit Check

• It is good practice to obtain a credit reference prior to issuing a County Court claim.

• Reveals existing CCJ’s and if unsatisfied – further action involving costs may not be prudent.

• Insolvency Act action may be effective if the debtors has something to lose.

• Corporate accounts – check net profits, net assets, issued share capital, list of directors and officers.

Page 24: UK County Court procedure

CCJ’s

• After ONE month stored on the Registry Trust Limited’s national database

• Web link:-

• http://www.registry-trust.org.uk

• http://www.payontime.co.uk

Page 25: UK County Court procedure

Full & Final Settlement

• If a debtor has made a payment which the creditor has accepted in “full and final settlement”, then no further action can be taken on the balance.

• Various test cases:-

• Pinnels Case (1602)• Foakes v Beer (1884)• D&C Builders Ltd v Rees (1965)

Page 26: UK County Court procedure

Part payment problem

A debtor may try to get you to accept a part payment in full settlement. Example

Debtor A owes creditor B £6000. A states in a letter to B that the service was poor or that deliveries were late. He encloses a cheque for £5000 with his letter stating that the cheque is in full and final settlement and that if full settlement is not accepted, the cheque must be held unpresented.

To be valid, consideration has to be an integral part of a contract, that of offer and acceptance. No extra consideration has taken place and the payment of a smaller sum does not discharge a debt for a greater amount.

In these circumstances, you can bank the cheque and pursue for the balance.

Write back accepting the cheque only as a part-payment.

Page 27: UK County Court procedure
Page 28: UK County Court procedure

The Collection Process

• Letter before action

• Legal action

Page 29: UK County Court procedure

Legal Action

• Issue claim

• Enter judgment by default

• Enforce judgment in County Court

• Enforce judgment via High Court Sheriff

• Insolvency Act demand

• Winding up/ bankruptcy

Page 30: UK County Court procedure

County Courts

Page 31: UK County Court procedure

Letter Before Action

After all reasonable procedures have been taken to

collect the debt:-• Telephone calls• Standard letters• Customer visits

A letter before action (LBA) should be sent either

from the creditor’s business or using a third party

(debt collection agency or solicitor)

Page 32: UK County Court procedure

LBA – useful for…

• Filtering process – flush out a genuine reason for non-payment

• Minimise costs

• Query resolution – force solution to the problem by demonstrating intent/resolve

• Establish dialogue – check debtor details and financial circumstances

Page 33: UK County Court procedure

LBA - elements

1. Full & correct names(s) & address(es)1. Gender2. All partners (if applicable) + bus address3. Company registered office + home address of

secretary

2. Total amount outstanding3. Interest charges – interest type &

legislation

Page 34: UK County Court procedure

LBA - Interest1. Contractual interest

1. Must include in terms and conditions of trading

2. Right to interest must be contractually bound

3. Should be deemed fair under the Unfair Contract Terms Act 1977

2. Statutory interest1. S.69 County Courts Act 1984 (currently at 8% per annum)

2. Added to debt when County Court claim is issued

3. Late payment interest1. Late Payment of Commercial Debt (Interest) Act 1998

2. Make debtor aware via letter or T&C’s (Base rate + 8% p.a.)

3. http://www.payontime.co.uk

Page 35: UK County Court procedure

LBA - Compensation Charges

• Late Payment of Commercial Debt (Interest) Act 1998

• Debtor must be aware of right to claim – include in T&C’s or letter

• Post charge to the Sales Ledger

Debt Charge

Up to £999.99 £40

£1000 - £9999.99 £70

£10,000 & above £100

Page 36: UK County Court procedure

LBA…finally

• Specific payment date – give a specific deadline for payment not just a number of days to pay within

• Stop trading! – continued late payment is likely if credit is extended beyond an LBA

• See example letter

Page 37: UK County Court procedure

Claim Form (N1)

Page 38: UK County Court procedure

Claim form – completion [1]

Once the deadline from the LBA has passed

and provided all the pre-action considerations

(Pre-action Protocols) have been taken into account…

complete the County Court Claim (N1):-

(See appendix):

Page 39: UK County Court procedure

Claim form – completion [2]

• Court - can be issued in the local court of either claimant or defendant

• Claim No. – leave blank; the Court will assign the number. Use in all future Court correspondence.

• Issue date – leave blank as the Court will advise both parties the date of claim issue

• Claimant – party who is owed the money, can use trading or registered office address

Page 40: UK County Court procedure

Claim form – completion [3]

• Defendant(s) - party who owes money• Full name including gender• Partnership – one or all the partners

– Partnership OR– Private residential address

• Corporation– Trading OR– Registered office address

Page 41: UK County Court procedure

Claim form – completion [4]

• Brief details of the claim– Goods sold and delivered + contractual interest– Services rendered + contractual interest– Returned cheque + court interest

Page 42: UK County Court procedure

Claim form – completion [5]

• Value– Debt + interest to the date of claim + compensation

– Xref to the Particulars of Claim on the reverse

– Is the same as Amount claimed (bottom right)

• Solicitors’ costs– Only for a solicitor – leave blank

• Total amount– Total of the Value + Court fees

Page 43: UK County Court procedure

Claim form – Court fees [6]

Not > £300 £30 > £15K but not £50K £360

> £300 but not £500 £45 > £50K but not £100K £630

> £500 but not £1000 £65 > £100K but not £150K £810

> £1000 but not £1500 £75 > £150K but not £200K £990

> £1500 but not £3000 £85 > £200K but not £250K £1170

> £3K but not £5K £108 > £250K but not £300K £1350

> £5K but not £15K £225 > £300K or not limited £1530

Page 44: UK County Court procedure

Claim form

Page 45: UK County Court procedure

Claim - completed (1)

Page 46: UK County Court procedure

Claim - completed (2)

Page 47: UK County Court procedure

Claim - completed (3)

Page 48: UK County Court procedure

Claim screen

Page 49: UK County Court procedure

Claim form – Page 2 [7]

• Claim No. – leave blank

• Human Rights Act – leave blank unless in doubt

• Particulars of Claim – set out full details of the Claim here – use a separate sheet if necessary

Page 50: UK County Court procedure

Claim form – Page 2 [8]

The Claimant’s claim is for £348.98 being

the price of goods sold and delivered by the

Claimant at the request of the Defendant as

per invoices dated from 01/01/08 to 31/03/08.

To date, the defendant has failed to pay the

Outstanding invoices therefore the Claimant

Claims the sum of £348.98.

Invoice date Inv ref Amount

Page 51: UK County Court procedure

Claim form – Page 2 [9]

Page 52: UK County Court procedure

Claim form – Page 2 [10]

Page 53: UK County Court procedure

Claim form – Page 2 [11]

• Interest– Accrued to date of issue– Daily rate to Judgment or earlier payment– Use due date for each invoice– Can only claim ONE type of interest

Page 54: UK County Court procedure

Claim form – Page 2 [12]

Types of interest:-

• Contractual

• Statutory

• Late Payment Act

Page 55: UK County Court procedure

Claim form – Page 2 [13]

Contractual

Contractual interest on that sum, at a rate of “8%”, as per agreed Terms and Conditions of trading, from “01/01/08 to 30/04/08” totalling “£6.42”.

Page 56: UK County Court procedure

Claim form – Page 2 [14]

Statutory

Interest on that sum under Section 69 of the County Courts Act 1984 from from “01/01/08 to 30/04/08” totalling “£6.42”.

Page 57: UK County Court procedure

Claim form – Page 2 [15]

Late Payment Act [base + 8%]

Interest on that sum under the Late Payment of Commercial Debts (Interest) Act 1998 at the rate of “12.75%” from from “01/01/08 to 30/04/08” totalling “£6.42”.

Page 58: UK County Court procedure

Claim form – Page 2 [16]

Daily rateTake the original debt value x interest rate/365

…….and continuing at the same rate up to the date of judgment or earlier payment at the daily rate of “£0.12”

Page 59: UK County Court procedure

Claim form – Page 2 [17]

Compensation chargesTo include these, use the following wording in the

Particulars or post to the sales ledger

The Claimant claims compensation arising from late payment under section 5A of the Late Payment Commercial Debts (Interest) Act 1998, under the table of compensation, “£40” is owed

Page 60: UK County Court procedure

Claim form – Page 2 [18]

Claim summaryElements of the claim should then be summed up:

AND THE CLAIMANT CLAIMS:

1.The amount of outstanding invoices plus “statutory” interest to date Total: “£355.40”

2. Interest at a daily rate of “£0.09” from “15/04/07” to judgment or earlier payment date

3. The costs of this case Total: “£50.00”

Page 61: UK County Court procedure

Claim form – Page 2 [19]

Statement of TruthThis should be completed by an authorised

representative of the Claimant, e.g.

Managing Director OR

Financial Director

Page 62: UK County Court procedure

Claim form – Page 2 [20]

Claimant’s addressIf a Registered Office address has been used on the

front page then it may be wise to use the trading

address here if different so the Defendant is

clear who the Claimant is

Page 63: UK County Court procedure

Claim form – Service(1) A minimum of 2 x signed copies should be sent

to the County Court + fee payable to HMPG.

(2) A third copy is endorsed and returned to you

(3) Provide copies for all multiple defendants

(4) Provide copy invoice/POD if you wish

(5) Service is deemed to be 2 x working days from date of posting by the Court

(6) Notice of issue [N205A] – [Appendix F]

(7) Response pack [N9] – [Appendix G]

Page 64: UK County Court procedure

Claim issued - N205A (1)

Page 65: UK County Court procedure

Claim issued - N205A (2)

Page 66: UK County Court procedure

Claim issued - N205A (3)• If the Claim and other documentation is returned by

the Royal Mail to the Court, a form N216

(Non-service form) will be issued.• The Claim must be served within 4 days of issue.• Apply on form N244 to ask the Court’s permission

for an extension to this time.• Service is normally deemed to be 2 days following

posting by the Court

Page 67: UK County Court procedure

Debtor’s response (1)

The debtor/defendant has 14 days from the date of

service to reply or acknowledge service…

[N9 - Appendix G]

…and then a further 14 days to file their defence

[N11 - Appendix J]

Page 68: UK County Court procedure

Claim response – N9

Page 69: UK County Court procedure

Debtor’s response (2)

1. Pay in full

2. Pay in part

3. Admit claim – no payment [N9A – app. I]

4. Admit claim – offer instalments[N9A – app. I]

5. Ignore claim

6. File a defence [N11 or N9B – app. J]

7. Defence & counterclaim [N9B – app. L]

Page 70: UK County Court procedure

Debtor’s response (3)

1. Pay in full1. Close the file

2. Consider permanent stop

2. Pay in part1. Enter judgment for costs and interest where just the

principal has been paid

2. Proceed to enforcement OR

3. Write off and close credit account

Page 71: UK County Court procedure

Debtor’s response (4)

1. Admit claim (N9A) – no payment1. Request judgment for immediate payment OR

2. Judgment with instalment plan

2. Admit claim (N9A) – offer of instalments1. Request judgment accepting instalments

2. Decline – Judge will direct reasonable instalment plan based upon defendant’s means

Page 72: UK County Court procedure

Debtor’s response (5)

1. Ignore claim1. Enter judgment in default using form N205A or

form N225 [Appendix F and M]

2. File a defence (N9B)1. Complete Allocation Questionnaire from the Court

form N150 [Appendix K]

2. Consider Summary Judgment application

Page 73: UK County Court procedure

Debtor’s response (6)1. Defence and Counterclaim (N9B)

1. Seek legal advice

2. Counterclaims only received in 2% of cases

3. If counterclaim exceeds the value of the original claim, the difference is to be paid into Court

Page 74: UK County Court procedure

Defended Actions

Page 75: UK County Court procedure

Summary JudgmentThe Court may give judgment against a Claimant

or Defendant if it considers:-• That either party has no real prospect of

succeeding on the claim OR• Has no real prospect of successfully defending

the claim or issue• Use form N244 to make an application to the

Court

Page 76: UK County Court procedure

Notes on defences• If you get a defence that shows a dispute then

your systems have failed• Defences in small cases are disproportionate

to the outcome• Litigate in proportion to the value of the claim• Mediate rather than litigate• SETTLE or AVOID them in simple debt cases

Page 77: UK County Court procedure

Track SystemThe Court will assign defended cases to one of the

tracks according to its value and complexity:-

Page 78: UK County Court procedure

Judgment

• Paper order from the Court for the Defendant to pay the Claimant N30 (N)

• Registered after 1 month

• Stay on Register for 6 years

• Advise the Court if paid within 1 month

• Defendant may apply for Certificate of Satisfaction N441 (V) if debt is paid

Page 79: UK County Court procedure

Enforcement – key questions

• Assets/property to seize

• Leasehold & HP exempt from seizure

• Title and ownership of goods

• Accessibility of assets

• Income/self-employed

• Debts owing to the defendant

• Land or buildings

Page 80: UK County Court procedure

Enforcement – methods

• Warrant of Execution (N323)

• Transfer to High Court (N293A)

• Charging Order (N379)

• Attachment of earnings (N337)

• Third party debt order (N349)

• Order to obtain information (N316/A)

Page 81: UK County Court procedure
Page 82: UK County Court procedure

Warrant (N323) – [1]

• Most common type of enforcement

• Assets seized and sold at auction

• Court uses Bailiffs

• Bailiff can seize goods up to a maximum value of £5000

Page 83: UK County Court procedure

Warrant (N323) – [2]

• The warrant can be issued for either the whole amount outstanding or part thereof subject to a minimum of:-

1. One monthly instalment

2. 4 x weekly instalments

3. £50

Page 84: UK County Court procedure

Court bailiff

Page 85: UK County Court procedure

Warrant process (N323) – [3]

• The Levy – claim the goods

• Inventory - list

• “Walking possession”

• Offer of payment

• Removal & storage

• Sales by auction

• Distribution of sale proceeds

Page 86: UK County Court procedure

Warrant process (N323) – [4]

Exemptions:-

• Goods on HP or subject to lease

• Tools of trade/ perishable items

• Livestock & pets/ household essentials

• Pawn tickets

• Firearms/ Fixtures & fittings

Page 87: UK County Court procedure

Warrant process (N323) – [5]

Rights of entry:-

• Allowed in by person

• Unlocked door or open window

• Business premises– Break in if no living accommodation is attached

and believe the defendant’s goods inside

Page 88: UK County Court procedure

Execution

Page 89: UK County Court procedure

High Court Sheriff

Page 90: UK County Court procedure

Court bailiff

Page 91: UK County Court procedure
Page 92: UK County Court procedure

Transfer to High Court (N293A) [1]

• Judgment must be above £600• Select a Sheriff from Enforcement officer

listing:-• www.dca.gov.uk/enforcement/directory05sm1.pdf • www.dca.gov.uk/enforcement/directory05sm2.pdf

• Get the County Court officer to countersign and seal the completed form N293A

• Send to the chosen Sheriff office with fee

Page 93: UK County Court procedure

Transfer to High Court (N293A) [2]

• Form N293A is a ‘Combined certificate of judgment and request for writ of fieri facias or writ of possession’

• Court certifies for the High Court that the details are a true record of the Court record in this case

Page 94: UK County Court procedure

Charging orders (N379) [1]

• Only applies to sole traders & partnerships

• Land Registry search for legal title

• Research for value and equity

• Serve application on defendant and all known creditors

Page 95: UK County Court procedure

Charging orders (N379) [2]

• Interim Order (Nisi) is issued. This should be registered with the Land Registry

• At the final hearing, a Final Order (Absolute) will be issued if the application is successful

• CO held against property till discharged

Page 96: UK County Court procedure

Attachment of earnings (N337) [1]

• Debtor must be employed

• Application form is sent to debtor– Can be without specific employer– Debtor to make offer of payment on form N56

• A Suspended Order is issued

Page 97: UK County Court procedure
Page 98: UK County Court procedure
Page 99: UK County Court procedure

Attachment of earnings (N337) [2]

• There is no expiry date for the Suspended Order

• If a Default occurs, a full Order can be made and served on the Employers

Page 100: UK County Court procedure

Third party debt order (N349) [1]

• Previously called a ‘Garnishee order’

• Third party must owe money to the debtor at the time of application

• Complete stating the source of your information

• Interim Order (Nisi) is issued by the Court

Page 101: UK County Court procedure

Third party debt order (N349) [2]

• The Third Party has to confirm the money is owed and is frozen until the hearing

• At the hearing, a Final Order (Absolute) is made

• The Third Party pays the Claimant directly

• Defendant can plead hardship

Page 102: UK County Court procedure

Order to obtain information [N316]

• Means to obtain information under oath in order to select most effective enforcement

• Individual – form N316

• Company officer – form N316A

• Order to attend Court for questioning

• Order for Committal if ignored

Page 103: UK County Court procedure

County Court flowchart

Page 104: UK County Court procedure

Summary

• The Debtor must have something to lose for the system to work

• Many Rogue Directors can, and do, hide behind the veil of incorporation

• Information is key to selecting the collection method

Page 105: UK County Court procedure

What is Insolvency?

• Liabilities exceed assets – balance sheet test (Solvency)

• Inability to pay debts as they fall due (Liquidity)

• Two types of Insolvency:-– Corporate– Individual

Page 106: UK County Court procedure

Corporate Insolvency

• Administrative Receivership

• Liquidation (3 types)

• Administration

Page 107: UK County Court procedure

Administrative Receivership [1]

• Requires fixed & floating charge

• Only for charges created before 15/09/2003

• The Debenture– Requires floating charge– Can be hostile or invited

Page 108: UK County Court procedure

Administrative Receivership [2]

• The Receiver’s powers are set out in the Debenture and they are there only to act in the Bank’s interest

• Meeting called within 3 months

• Usually followed by liquidation

Page 109: UK County Court procedure

Creditors’ Voluntary Liquidation

• Most common type

• Directors and members led

• Members nominate Liquidator

• Meeting of Creditors called

• Creditors have final say

• Liquidation committee

Page 110: UK County Court procedure

Members’ Voluntary Liquidation

• Solvent Liquidation– Company restructure– Retirement

• Requires Declaration of Solvency

• Can be converted if not 100p/£

• 12 months to liquidate the assets

Page 111: UK County Court procedure

Compulsory Liquidation [1]

• Winding-up Petition presented to Court– Usually inability to pay debts– Unsatisfied Statutory Demand > £750– Liabilities exceed assets– Unsatisfied CCJ - enforcement

Page 112: UK County Court procedure
Page 113: UK County Court procedure

Compulsory Liquidation [2]

• Based on Court Order

• Advertised in the London Gazette– Bank a/c often frozen

• Supporting creditors

Page 114: UK County Court procedure

Compulsory Liquidation [3]

• Hearing (6-8) weeks– Winding-up Order– Dismiss petition– Adjourn

• Official Receiver appointed– Investigate failure– Acts as Liquidator until an IP is appointed

Page 115: UK County Court procedure

Administration [1]

• Introduced by the Insolvency Act 1986

• Petitioned by Director, Shareholder or Creditor

• Specified purpose– Survival in whole or in part– More advantageous realisation

Page 116: UK County Court procedure

Administration [2]

• Creates Moratorium…(halt to..)– Retention of title– Legal action– Discontinuation of trading

• Creditors’ meeting to approve proposals within 3 months of appointment

Page 117: UK County Court procedure

Company Voluntary Arrangement

• Director led

• Minimum Court involvement

• Directors appoint nominee

• Nominee calls Creditors’ meeting and provides proposals – NO Moratorium

• 75% of Creditors must agree or CVA fails

• Nominee becomes Supervisor or is outvoted

• Default = Liquidation

Page 118: UK County Court procedure

Individual Insolvency

• Bankruptcy

• Individual Voluntary Arrangement (IVA)

• Partnership Voluntary Arrangement (PVA)

• Liquidators & trustees

• Creditors’ meetings

• Distribution of funds

Page 119: UK County Court procedure

Bankruptcy• Statutory Demand (S.268) - £750 or more

• Petition by Creditor (or Debtor themselves)

• Official Receiver appointed – Initially trustee– Assets vest in him– May appoint IP as trustee

• Trustee has wide powers of investigation

• Usually last 12 months

Page 120: UK County Court procedure
Page 121: UK County Court procedure

Individual Voluntary Arrangement

• Nominee calls meeting:– Report & contents– 75% in value of Creditors voting must agree

• Forms a contract with the Creditors

• Supervisor has no powers of investigation

• Forms Moratorium

Page 122: UK County Court procedure

Partnership Voluntary Arrangement

• Introduced in December 1994

• Same procedure as CVA

• IVA’s recommended for partners

• No effect on partners’ private assets

Page 123: UK County Court procedure

Liquidators & trustees

• Look at Preferences

• Look for transactions at under value

• Look for wrongful or fraudulent trading

• Examine witnesses

• Apply for director’s disqualification (CDDA)

Page 124: UK County Court procedure

Creditors’ meetings

• Notice given to Creditors

• Proxy forms

• Right to question

• Investigative function

• Voting & challenging nominations

Page 125: UK County Court procedure

Distribution of funds

1. Petitioner’s costs

2. Insolvency fees

3. Fixed charge holders

4. Preferential creditors (Hol pay/wages)

5. Floating charge holders

6. Unsecured creditors (VAT + tax)

7. Shareholders

Page 126: UK County Court procedure

Insolvency v Legal action

Advantages:-1. Initially quick, easy & cheap2. Focuses the debtor on your debt3. Gets ahead of other creditors4. Creates final chance in negotiations5. Solution achieved quickly – either way6. Maximum pressure

Page 127: UK County Court procedure

Insolvency v Legal action

Disadvantages:-1. Cannot be used for disputed debt

2. Costly after initial stage

3. Alerts other creditors

4. Freezes bank account

5. Official Receiver’s deposit6. Poor knowledge may lead to poor legal advice

7. May be what the debtor wants

Page 128: UK County Court procedure
Page 129: UK County Court procedure

End

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