Creditors

If you are based in Scotland and looking to recover debts from an English debtor, or vice versa, access to the right support in each jurisdiction is key.  

We routinely act as Scottish agents for solicitors in different jurisdictions to assist in debt-recovery for their clients, particularly for English firms of solicitors. We can provide strategic advice on the appropriate forum to raise debt, enforcement or winding up proceedings where appropriate, give accurate time and cost estimates, early reporting and deal with all aspects of the court procedure for you in the Sheriff Court or Court of Session.

We act in partnership with many English firms on all aspects of Scottish litigation and are familiar with providing them with the information needed to take instructions and manage their clients. Our broad network of English partners also means we can act quickly for Scottish clients on matters involving English debtors.

Disputes over debts are common, with the individuals or businesses involved challenging the debt demanded. At Thorntons, we routinely act in disputed debts to resolve the matter in a proportionate and cost conscious manner. We regularly advise on all issues of breach of contract in different sectors; and very commonly in respect of sale and supply of goods and services issues. We will engage with you to understand the issues around the dispute, and will advise upon self help remedies as well as negotiating outcomes, alongside formal disputed debt actions.

Where you are likely to be facing litigation in respect of a disputed debt, registering caveats at the relevant Sheriff Court and Court of Session is good practice and acts as an early warning system of orders being sought against your company. Companies with a caveat then have the opportunity to argue against the appointment of a provisional liquidator if such an appointment is sought (or any other interim order sought such as interiminterdict). This allows your company to respond to any particular debt without having to unravel an interim award made without your knowledge. We can carry out caveat registration on your behalf, and provide advice on the process and accurate cost estimates.

Statutory demands can be used to call for payment from personal and corporate debtors. Where a statutory demand is not denied, an unanswered statutory demand is a ground to petition for the sequestration or liquidation of the debtor and is therefore an assertive and cost-effective manner to pursue your debt.

We regularly advise on the use of statutory demands as a method of calling for payment of a debt and can also advise you on what to do if you have received a statutory demand for payment.

With a retention of title (also known as reservation of title) clause in your sales contract, the specified goods remain the property of the supplying firm until they are fully paid for. This can be key in debt recovery cases, particularly when dealing with businesses facing insolvency.

For a retention of title clause to be valid it has to be constituted in the contract before the goods are delivered, and the goods have to be specified so that they are identifiable. If a retention of title clause is not validly created, it does not prevent title passing to the purchaser of the goods, regardless of whether the full price has yet been paid for the goods. In an insolvency situation, an examination of the retention of title clause under debate is therefore critical in ascertaining the effectiveness of the retention of title clause in question.

Our Restructuring and Insolvency team are experienced in examining and advising on the issues of retention of title from both supplier and customer perspectives, and also on the clauses when a Company is in insolvency from the perspective of Trustees in Sequestration, Liquidators and landlords.

If a debt is undisputed, or there is no substantial good faith denial of the debt, a petition for winding up (liquidation) may ultimately bring the best prospects of payment of the debt. It is a very quick way of finding out whether a debtor can’t pay or won’t pay. If the debtor wishes to continue trading, they will often seek third party funding to avoid a winding up order and pay off the underlying debt.

Timing is critical in considering the effectiveness of a winding up petition, as if there are multiple creditors circling, it may be more difficult to obtain payment. If it is possible to establish that there is a need to protect and preserve assets for the benefit of creditors, a provisional liquidator may be sought from the court. This can be done before court papers are served on the debtor.

Our Restructuring and Insolvency team routinely pursue petitions for liquidation on behalf of creditors. We can put you in contact with our broad network of insolvency practitioners to consider for taking forward the liquidation. Generally, an insolvency practitioner will require a limited indemnity to undertake initial investigations into the company debtor and their ability to meet the debt. As creditor, if you are paid by the debtor to avoid the insolvency, that underwriting need not be called upon.

Recovering debt from a business with assets across borders can be a highly complex issue. Our team have experience of enforcing Scottish decrees successfully in foreign jurisdictions through our network of international legal partners in the WSG Network. We have raised foreign enforcement post-Brexit and are familiar with the latest processes.