This month’s contract clinic comes from an aggrieved subcontractor whose main contractor client is refusing to pay invoices. David Birne from Begbies Traynor explains whether a ‘winding-up’ petition is a sensible strategy.
The question
Our client, a main contractor, is refusing to pay our invoices. I’ve heard that it’s possible to issue a ‘winding-up’ petition to force them to pay. Is that possible and how successful would it be?
The answer
With the current cash crisis in the construction industry, many employers, contractors and subcontractors are in arrears with agreed payment terms or negotiated time to pay arrangements. So what can suppliers do to elicit payment and move their claim to the top of the outstanding payables pile?
There are limited formal routes available to collect an outstanding debt. Once the friendly approach through demand letters and telephone calls has been tried and has failed, a more robust route may be required.
In this situation, should a winding-up petition be issued?
It is common practice to issue a statutory demand to warn the debtor that you intend to issue a winding-up petition. However, this is not legally necessary if you have clear evidence of the debtor’s insolvency. It is hoped that a statutory demand brings the debtor to the table, as they are aware that a winding-up petition can be issued 21 days later.
Immediate effect
In 2022 the Caseboard.io website was launched and this provides near instant access to court records. As a result, when a petition is issued at the court this appears on Caseboard and the effect is immediate, potentially leading to the freezing of the debtor’s bank account/funding sources and potential reputational damage.
Read the full article here. If you need assistance with with a similar issue, please do feel free to contact our team today.