Updated: 18th May 2020
The coronavirus pandemic has created a cash flow emergency for businesses nationwide, with many suffering extreme financial distress due to the inability to trade during lockdown. Vast swathes of the economy have been forced to close down and it’s unclear how many businesses will survive, but one of the major threats in this situation is aggressive debt collection.
The Sheriff’s Office has stated that they are following government guidance, and have temporarily suspended visits by enforcement officers. They are continuing to apply for Writs of Control, however, which are court orders that allow them to visit premises at some point to take control of goods.
If the debt remains unpaid, these goods are seized and sold at auction to generate money to repay the creditor. At the time of writing, the Sheriff’s Office state that communications are made via phone call, email, and letter, in an attempt to recover monies for their clients.
This is a fluid situation, however, and government guidance on bailiff action and the collection of debts may change as the crisis evolves. But one group that has experienced particular concern over business debts and bailiff action is commercial tenants.
Commercial rents are typically one of the higher outgoings for businesses with physical premises and offices to run, and these organisations are experiencing significant cash flow issues due to the lockdown.
Some landlords attempting to collect overdue rents have been threatening eviction proceedings against businesses that, in many instances, were simply unable to generate any cash due to coronavirus.
To remedy this unmanageable situation the government introduced new legislation to prevent commercial landlords from taking eviction proceedings, and using aggressive debt collection tactics at this time.
So what does this mean in practice?
When companies are financially affected by coronavirus, commercial landlords have been temporarily banned from using the following measures to recover monies owed to them:
A 90-day moratorium on evicting commercial tenants has also been introduced, and this may be extended in the future.
Bailiffs may continue to contact some businesses by email, telephone, or letter, placing additional pressure on directors already trying to keep their organisation solvent. This is why obtaining professional advice at this time is advisable.
Reliable expert advice clarifies the options available for dealing with bailiff pressure - there may be ways to pay off the debt in full, for example, or to set up a formal instalment plan to repay over a number of years.
A Company Voluntary Arrangement (CVA) could be a suitable option if the business concerned is viable in the long-term, and the financial difficulties are solely a result of the coronavirus lockdown.
This legally binding arrangement offers businesses the opportunity to pay a single affordable monthly repayment, typically over five years. For more information on this and how to deal with bailiff action during the coronavirus lockdown, please contact one of our partner-led team at Real Business Rescue – we offer free same-day consultations to quickly assess your situation.
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