Adele Whaley

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Debt recovery tips during the COVID-19 outbreak

Coronavirus / 06 April 2020

Last week, we provided an update on changes to insolvency laws which will come into effect in the coming weeks to help struggling businesses stay afloat during and after the coronavirus pandemic. These changes include a temporary suspension of wrongful trading rules for companies. In this article, we consider some debt recovery tips during the COVID-19 outbreak.

What could you be doing now?

– Have open, frank and flexible discussions with your debtors to assess the reason for their inability to pay

– If appropriate, you could agree a repayment plan (although be mindful of the dangers of varying contracts)

– Your customers may seek to rely on a force majeure clauseor the law of frustration.

– Check your contractual terms: are there any relevant force majeure clauses or will the law of frustration apply.

Whilst we ‘are all in this together’, remember that any money you can collect now is direct cash to help you weather the storm. Similarly, the legal process can provide you with the opportunity to obtain forms of security (such as charging orders over property) which could boost your chances of recovery if debtors are placed into liquidation in the future.

Potential problems
If you cannot reach an agreement with a debtor one option is to serve a statutory demand on them.  A statutory demand is the first step in taking either bankruptcy proceedings (if the debtor is an individual) or winding up proceedings (if the debtor is a corporate entity).  Given the serious consequences which can follow a statutory demand being served, the service of this document often results in payment being made.

In respect of personal bankruptcy proceedings, the minimum debt for serving a statutory demand on an individual remains at £5,000. However, in Australia this limit has just been increased. There have been discussions in this country around extending the time for complying with a statutory demand from 21 days to six months, though no decision has yet been taken on this point.

For corporate insolvency proceedings, the minimum debt for serving a statutory demand is £750.

A statutory demand must be personally served.   At the present time process servers are continuing to carry out personal service of documents, but this could change at short notice.

If payment is not received after service of a statutory demand it may then be necessary to take the step of issuing a bankruptcy petition (for private individuals) or a winding-up petition (for companies).

The position with insolvency proceedings is subject to amendment by the Government, with new announcements being made on a regular basis.  Should any further amendments be made to the insolvency laws we will provide further updates.  In the meantime, our highly experienced legal teams, across all sectors, are on hand around the clock to provide urgent advice should you have any concerns.


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This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. This update relates to the prevailing circumstances at the date of its original publication and may not have been updated to reflect subsequent developments. If you have general queries about our updates, please email:

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