With the depressing news that more than 20,000 Scots will go bust in 2012, and an average of 25 Scots firms a week will go under this year, it has never been more important to be alert to payment disputes.
Consider the following scenario. You arrive at work early on
Monday morning, to discover that the supplier with whom you have
been having a long-running, but relatively minor dispute over
payment, has secured a winding up order against your company and
appointment of a liquidator from the court. Or, equally
distressing, a sheriff officer appears at your door with another
form of court order in his hand - an interdict - stopping you from
carrying out a key part of your business activities.
As if the consequences of such orders are not bad enough, one of
the most distressing aspects of having orders such as these served
against your company is that it often comes as a complete surprise,
but one that has the potential to turn your business inside
out.
These orders can be awarded by a court on an interim basis without
their recipients even having the opportunity to present their side
of the story. There is, however, something very simple and
straightforward you can do to avoid this.
Caveat
By lodging a form of legal early warning system known as a
'caveat', you are entitled to receive advance notice should
anyone apply for an interim interdict or interim winding up order
against your business, or an order for sequestration against you in
the Scottish Courts. With a caveat in place, your solicitor will be
advised by the court in advance and you will have the opportunity,
not otherwise available, to attend court to defend the application.
Caveats provide peace of mind by ensuring that we are given prior
warning of any of these types of orders sought against our
clients.
If there is no caveat in place the order can be granted without you
knowing anything about it in advance. The consequences of this and,
as a result, having to deal with the strong possibility of rapid
business failure or at least serious disruption are clearly dire.
We therefore recommend that all of our commercial clients have
caveats lodged at each Sheriff Court where such an order is likely
to be made - usually the place of their registered office, any
places of business and locations of substantial contracts - and in
the Court of Session.
Caveats are inexpensive and simple to lodge and have a lifespan of
one year. MacRoberts charge a fixed fee of £50 per caveat
(plus VAT) plus the court fees which are £30 for each Sheriff
Court caveat and £45 for each Court of Session caveat. We
will also write to you approximately a month before they are due to
expire in order to determine whether they should be renewed. This
corporate early warning system should operate as a fundamental part
of every company's risk management strategy
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.