Getting the best out of a bad situation – guest blog by Menzies LLP

7 May 2020

With the economy in a drastic state of change due to the Covid crisis, how do we protect our account receivables and maximise any return?

This week, Menzies LLP provided an insightful webinar highlighting their view of the insolvency trends prior to this crisis and what is expected to follow once the lockdown measures are gradually lifted. The article below highlights some of the areas that were covered during the webinar, followed by a link to the webinar recording.

New Insolvency Rules 2016

Since the inception of the ‘New Insolvency Rules’ of 2016, there has been the introduction of a decision process, deemed consent and virtual meetings across all types of insolvency processes. What does this mean for credit managers? In short, you must act fast.

Menzies LLP can assist with the understanding of the documents you have received, form completion and the options available to you.

Requesting a physical meeting

Creditors have the right to request a physical meeting under the 10/10/10 rule. This may be useful where questions may be best served in a forum where other creditors can support the lines of enquiry and direct the incumbent liquidator to the right investigation avenues.

However, it is questionable whether it would benefit the creditors in every case or indeed be feasible during the lockdown restrictions.  Sometimes the same can be achieved by just having the right advice and asking the right questions at the virtual meeting.

Does a judgement or petition still help in recovering debt?

If you are considering taking action against a customer, such as a judgement or petition, it is useful to review their accounts before you take such action, so can consider:

• What assets do they have?
• Are they well known in the industry? Will the advert of a petition disrupt future business revenue? This may well speed up a payment plan but could also affect future custom.
• Is it a salvageable business i.e. can it be sold to another party? In an insolvency process, this is likely to provide realisations to the estate, which could, in turn lead to dividends for its creditors.

Where you feel that such a tool is a viable option prior to an insolvency, it will begin building the payment pressure. If the customer is considering their options, then it is likely that their hand would be forced to address pressing creditors ahead of others.

Communication

Key to any recovery (and more so at present) is communication, so the earlier you engage with your customers the better. Some may be able to offer payment plans, some may expect an upturn after the lockdown restrictions are lifted, some may even pay but there may be those that genuinely are unable to pay their debts.

Whilst there is some leniency during the lockdown period, the Courts have been clear that the Covid crisis should not be a defence where the company was already experiencing solvency issues.

For more information, please click the link to view the webinar recording in full – which finished with an interactive Q&A session. Alternatively, to read more on the services that Menzies offers to creditors, please click here.

If you have any questions in relation to this webinar, please email Bethan Evans, Head of Menzies Creditor Services at bevans@menzies.co.uk or call 02920 447 512.