July 2008 - Zero tolerance approach to bad debt


Business Law Update
from Cousins Business Law

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July 2008

Gary CousinsWelcome to the July issue of Business Law Update from Cousins Business Law.

I hope you will find information relevant to your business in this month’s issue. 

We are keen to address topics of concern to business people so if there are questions or subjects you would like us to cover email your ideas to marketing@business-lawfirm.co.uk.


Gary Cousins
0121 778 3212

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The Zero Tolerance Approach to Bad Debt

Things aren’t looking good. We hear on the news every day about the credit crunch, rising inflation and economic growth stalling. Most commentators are saying that things will get worse and stay bad for some time before they get better.

All this will inevitably mean that pressure will be put on cash flow. Your clients will be slower to pay (because of their own cash-flow problems), more bad debts are likely to occur and the bank is likely to be less happy about extending your overdraft.

We are finding that the economic downturn is even causing conflict between different departments in our clients’ businesses. Sales teams are finding it harder to get orders and so want to relax procedures, maybe by offering longer credit terms or undertaking less stringent checks on credit worthiness. Finance departments, on the other hand, are trying to tighten up credit control procedures and reduce the amount of overall credit given and exposure to the risk of bad debts generally.

It’s never good to have a business pulling in two directions and so it is important to make decisions on credit control policy in an open and balanced way.

Obviously, just how strict you are with credit control is a business decision and needs to be balanced with your need for sales, but now is the time (before things get worse) to review your credit control procedures - before you end up with problems.

Read the full article The zero tolerance approach to bad debt which outlines 7 crucial steps you can take to avoid bad debt and to tackle debt problems when they occur.

Our Dispute Management Solicitor, Gary Cousins, can help by working with you to set up an effective credit control procedure. We can draft your terms and conditions so that they maximise your chances of getting paid - in full and on time. We can advise on whether to take court proceedings and, if so, the best procedure to use and will then fight your corner in court to give you the best possible chance of making a full recovery of the debt. Book an initial free telephone appointment with Gary Cousins here or call 0121 778 3212.

Legal Update

Innocent Victims Could Lose Property

A recent Court of Appeal decision has given the green light to banks to repossess properties owned by the innocent victims of property fraud.

In Barclays Bank v Guy a fraudster executed a transfer of Mr Guy's property to himself and successfully had the transfer registered at the Land Registry so that he became the registered proprietor of the property. He then borrowed money from Barclays Bank and secured the loan with a mortgage against Mr. Guy's property.

Upon becoming aware of the fraud, Mr. Guy applied to the Court of Appeal to rectify the fraudulent transaction and have himself reinstated as the owner of the property and the mortgage in favour of Barclays removed.

The Court of Appeal determined that it was possible to reinstate Mr. Guy as the registered proprietor of the property but the mortgage to Barclays would remain. This meant that Barclays still had a valid power to sell the property for non payment of its loan even though Mr. Guy was not the person who had borrowed the money

This is a staggering decision which effectively means any of us could find our property being repossessed because of the actions of a fraudster. Anyone owning property they do not live in themselves is particularly vulnerable to this type of fraud.

It is possible to protect yourself against this type of fraud by completing a simple form and lodging it at the Land Registry. If you are worried about the implications of this case then please feel free to contact Steve Petty for further advice.

Plain English Legal Advice

I’m a Tenant Get Me out of Here

You are renting commercial premises; business is tough; you want to move to smaller (or just plain cheaper) premises to cut costs. You dust off that lease you signed a couple of years ago to find there are another 8 years to run. What can you do?

This is a question that we’re expecting to be asked a lot this year as businesses attempt to tighten their belts.

Many tenants sign up to 5, 6 or 10 year leases without giving a moment's thought to the enormity of the financial commitment they are making. One of the things we always point out to tenants entering into a new lease is the total financial commitment they are making. For example, a 5 year lease at £20,000 per annum is a total commitment of £100,000. It's amazing how few business people think of it in those terms.

In addition to the rental costs, there are the costs of keeping the premises in good repair which for an older building can be absolutely astronomical.

If you find yourself staring down the barrel of several more years' rent on premises you don't want with a nasty repair bill for the premises as the sting in the tail, there are a few strategies you can adopt to try and soften the blow. Read about these strategies on our website in I’m a Tenant Get Me Out of Here.

Plain English legal advice from Steve Petty of Cousins Business Law - you can reach Steve on 01926 629 005.

Useful Links

Quick Guide to Lease Negotiation

The Cousins Business Law website contains a new ‘quick guide’ for anyone about to negotiate a lease. It includes insider tips on what you should and shouldn’t agree to as well as advice on Stamp Duty Land Tax liabilities. You can read the Guide here.

Olympics Procurement Site

The London 2012 Business Network has launched a website to explain how businesses can get involved in the 2012 Olympics. The sister site Compete For is the main site where all games related contracts will be posted. After an initial registration process you can view all games related contracts.

Litigation Madness

Criminal Proceeds Safe from the Court – can that be right?

If someone is convicted of a criminal offence, the court can make a confiscation order whereby the proceeds of the crime, or at least those remaining, are confiscated to prevent the criminal from benefiting from the offence.

An issue that regularly comes up in such cases is what happens if the assets of the person convicted (usually the husband) are shared by his wife. Certainly, her share cannot be touched if she is innocent of her husband’s criminal activity but what if she knew what he was up to?

The Court of Appeal decided this recently in the case of Marion Gibson. Her husband, Gene Gibson, had been convicted of smuggling cocaine into the UK and a confiscation order was made for over £5 million. The matrimonial home was held in joint names and the court had found that Marion knew of her husband’s criminal activities and that the house had at least partly been funded from criminal activity.

Nevertheless, the Court decided that her share of the house could not be touched. She had not been convicted of any criminal offence and it would be contrary to her human rights.

It appears that this does however leave the door open for a criminal to transfer assets to his wife to avoid them being confiscated by the courts and presumably for him to enjoy after he is released from prison.

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Cousins Business Law is a member of the Law Society & regulated by the Solicitors Regulation Authority. Head Office: Swan House PO Box 11543, Birmingham, B13 0ZL. Tel +44 (0)121 778 3212. Fax: +44(0)121 275 6155