Posted: Monday, 1 March 2010 @ 14:42
It is a sad reality of commercial life that there are now many businesses being conducted at the margins of commonly accepted business practice. By keeping ‘on the move’, they avoid debts and other liabilities and reduce their overheads putting their properly run competitors at a commercial disadvantage. Trading Name Tricks
Increasingly we find that there exists a series of different businesses with similar trading names and featuring a common ‘managing director’ or ‘principal’ figure. It is quite possible to see different addresses for some or all of these businesses creating the impression that they comprise a group of companies. This may give you the impression of a growing and successful business venture. Get to Know Any New Customer
If you are about to deal with a new customer, just pause for a moment to consider who you are dealing with. Are you going to be investing time and effort in doing business with a new customer in the expectation that, when you invoice them, they will pay in line with your 30-day terms? Can you be sure of their status and credentials?
When things go wrong, as they inevitably will from time to time, your (last) resort is to the civil courts. The first thing you must do when you take action in the civil court is identify the business you are claiming against. But what if you can’t? Consider the following:
Darren Sharpsuit of ‘Bling Shopfitting & Design’ of Unit 15, Bitter End Trading Estate, Slough, places a substantial order with you and you start work on it, committing resources, raw material, manpower and overheads. There is a free channel of communication by email as work progresses. Darren’s emails come from a ‘Bling Shopfitting’ email address and everything seems in order. Delivery is made, as requested, to Darren’s other premises at Suite 12, Dunnup Building, Gravesend.
Only when you don’t get paid do you realise that in fact there had been a limited company called ‘Bling Shopfitting & Design Limited’ at the Bitter End address when you accepted the order but in fact that had been dissolved from the Companies Register during the last month for failing to return the annual forms. It had (legally) ceased to exist.
Darren, however, now seemed to be trading on his own account as ‘Bling Shopfitting’ and had taken over the lease.
When you ring Darren, he tells you that obviously he is not responsible for the debts of a company that has now ceased to exist.
Where are the goods you wonder? They were delivered to a temporary ‘virtual office’ address and have been sold on by another of Darren’s businesses, a partnership called “Sharpsuit and Bling trading as Bling Design”.
Darren reports that, unfortunately, the partnership paid the company Bling Shopfitting & Design Limited for your goods shortly before it was struck off the Register of Companies so any action you take in court has to be against the company which no longer exists.
Now comes decision time. You can apply to a judge (at some cost) to restore the dissolved company to the Register, then pursue it for the debt. Is there enough at stake to make this costly litigation worthwhile? Will the company have any money to pay anyway? Putting Measures in Place
Do you know the business you are about to deal with? If you rely on a sales team that are driven by commission targets, can you be sure that they are exercising enough care in their appraisal of the potential customer?
As we increasingly conduct commercial life at a distance, the opportunities to mislead available to those of ‘partial’ honesty grow exponentially.
Contact Cousins Business Law for advice on this topic.
Blog by Gary Cousins
Gary has been providing legal advice to shareholders, directors and business owners for over 25 years. Specialising in dispute resolution Gary is based in Birmingham with clients throughout the UK and overseas. View profile
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