How can I protect my company from cash flow problems due to outstanding payments?

It is well worth keeping a close eye on your customers to spot any early signs of financial distress and act quickly.

Introduction

Background

In the case of Horton v Henry, the Court of Appeal has recently upheld the High Court’s decision that a Trustee in Bankruptcy cannot compel a bankrupt to draw down his pension rights where the bankrupt has not elected to do so.

The facts

While not an exhaustive list, here is a reminder of some measures you might want to think about to help mitigate the effects of insolvency on construction projects. As with all these measures (and with insolvency generally) there are a number of complicated issues to be considered, so do seek advice as necessary.

Performance security

In May 2015, I wrote an article about the conflicting lower court decisions in Raithatha –v- Williamson and Horton –v- Henry, concerning undrawn pension entitlements and income payment orders. The Court of Appeal has now finally handed down its long expected Judgment.

The facts

Through corporate acquisitions and asset transfers, BAT Industries plc (“BAT”) (a Claimant in the proceedings) became liable to contribute to the clean-up of the sediment of the Lower Fox River in Wisconsin, U.S.A. Arjo Wiggins Appleton Limited (“AWA”), a wholly owned subsidiary of Sequana SA (“Sequana”) (a Defendant in proceedings), became liable to indemnify BAT for part of any monies paid out. Provision was duly made in AWA’s accounts to reflect a best estimate of the value of such liability.

Introduction

When someone is made bankrupt, their interest in the family home vests automatically in their Trustee in Bankruptcy, upon his or her appointment. The Trustee has 3 years from the date of the bankruptcy order to realise this interest. The Trustee will first of all ask if a third party is willing and able to purchase the Trustee’s share, usually 50% of the available equity. If that is not possible, then the Trustee will request that the property is put on the market for sale. As a last resort, the Trustee can apply to the Court for an order for possession and sale of the property.

Under the insolvency legislation, any dispositions of property or payments made by a company after it has been presented with a winding up petition are void, unless validated by the Court.

Agriculture is a long-term business and most people within the sector are proud of its reputation for straight talking and fair dealing. Debt issues can arise at any stage, but there are particular cyclical problems at the moment which mean that there is more debt-chasing activity, as cashflow pressures intensify.