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Caveats against liquidators
One of the orders you can lodge a caveat against is the appointment of a liquidator. This is becoming a more common means of trying to recover debts although it is only effective in certain circumstances and can be very risky.
The reason that caveats are so important is that the court can appoint a liquidator over the affairs of your company without giving you any chance to be heard in court. All that a creditor has to do is persuade the court that, as far as it anyone can tell, you are not able to pay your debts as they fall due.
In fact this may not be the case at all. There may be dispute about how much is due or about when payment is to be made, but if the court doesn’t hear your side of things, the liquidator may already be appointed before you know anything about it.
Once a liquidator is appointed it becomes much more difficult and much more expensive to persuade the court to remove him. If the Court can’t be persuaded then the only way of getting the liquidator removed is usually to pay the whole debt due to the creditor, plus their legal costs plus the liquidator’s fees, all of which can easily be over £1,000 and that doesn’t include your own legal fees. Even after the liquidator is removed it may not be the end of your troubles. The appointment must be advertised in the newspapers, unless the creditor is paid quickly, and once your other creditors get word, they may try the same thing and it will certainly be more difficult to keep credit lines open.
Unless your company really is in financial difficulty, these problems can be avoided by following a few simple rules;
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Make sure that caveats are lodged in the appropriate courts.
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If you receive a letter which uses the words ‘unable to pay your debts’, call us at once. These letters usually only give a few days notice, delay can be fatal.
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Make sure you have clear paperwork showing either that a debt is disputed or isn’t due for payment.
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Most important, don’t ever think that it can’t happen to you!
Robin Millar, January 2000
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