Newly introduced legal rules could potentially have a ‘serious impact’ on businesses trying to recover debts from individuals, law firm Hewitsons has warned.
Hewitsons issues debt protocol warning to businesses
Businesses that fail to comply with ‘The Pre Action Protocol for Debt Claims’, which came into force on October 1, face delayed repayments and possible sanctions from the Court, if proceedings reach this stage. The protocol requires business creditors – whether limited companies, partnerships, sole traders or public bodies – to provide more documentation to individual debtors, including sole traders, than was previously demanded.
For example, such creditors must now include prescribed information in their letter of claim. In all cases, the letter must be accompanied by a standard Information Sheet and Reply Form, as well as a Financial Statement Form.
Creditors must also be more proactive when engaging with debtors to ensure that information is properly exchanged and deadlines are met, among other changes.
James Simnett, a Chartered Legal Executive in Hewitsons’ Corporate Recovery and Insolvency team, said all this will materially affect how the collection of a debt is handled.
He added: “The protocol has been designed to help the parties to resolve debt matters amicably and out of court where possible, which is a positive move. “However, it does place a greater onus on creditors to provide more documentation than they have previously been required to, and in specific formats.
“In order to avoid long repayment delays and possible sanctions, businesses need to be fully aware of the changes and comply with these new rules. Those that don’t could find themselves in serious difficulty when they get to Court, as the Court will expect compliance with the Protocol and will take a failure to comply into account when dealing with the case.”
Hewitsons, which was founded in 1832 and has offices in Cambridge, London, Milton Keynes and Northampton, is a large business law firm with market recognised expertise for handling a wide variety of disputes, litigation and insolvency cases for organisations across the private, public and not-for-profit sectors.
Any business wishing to recover debts from an individual or a sole trader and would like to know how they should navigate their way through the new rules can contact James Simnett by calling 0207 400 5045 or emailing email@example.com
We pride ourselves on delivering an outstanding service to a wide range of individuals, businesses and institutions including charities, educational and sports bodies. The firm’s size and breadth of specialisms means each client receives the focus it requires.
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