Having enforceable security over all of a borrower’s assets is obviously of primary importance to a lender.  However, where a borrower occupies leased premises, ensuring the lender has quick and reliable access to the collateral is equally important, especially if the landlord proves to be unco-operative after a borrower’s default.  Although court-ordered access to a borrower’s leased premises can be sought after a borrower’s loan default, a landlord waiver obtained prior to an initial advance of a loan can bring some added certainty to the realization process outside of a bankrup

Although service of a statutory demand or winding-up petition on a company is a blunt and unsophisticated debt recovery tool, it will often have the desired effect for a creditor as they are seldom ignored and ignored only at the company's peril. It can often prompt payment of the sum due, or judgment owed, where previously there has been prevarication and empty promises of payment.

Here is a reminder of some important issues a (solvent) company should consider if a statutory demand or petition is served upon it.

Doing nothing is not an option

The case of White v Davenham Trust Ltd, has reaffirmed that a creditor can choose its own method of enforcing a debt which has been guaranteed even where it might hold security for that debt.

An intervening bankruptcy will not defeat a charging order where the bankruptcy was entered into in an attempt to frustrate the charge.

The court has a limited discretion not to make a bankruptcy order where the debt is the subject of a statutory demand which has not been paid and is outstanding at the time of the bankruptcy petition hearing.

The threat of insolvency proceedings against a corporate debtor can greatly assist a creditor's primary objective of getting paid, preferably in advance of everyone else. This is particularly so where the debtor is prevaricating but there is no genuine dispute that the sum in question is due and owing. Although the courts decry the use of the winding-up procedure as a means of debt collection, it is often a very effective tool.

Consider the following when faced with a corporate debtor who is refusing, without genuine reason, to settle its debts:

In circumstances where a debtor lacks mental capacity to deal with a statutory demand and subsequent bankruptcy petition, the court will rescind or annul a bankruptcy order.

In the current economic climate, there are a number of key issues facing borrowers in the event of lender insolvency or default.

Committed facilities/term loans

Provided they are fully drawn and the borrower is not in breach itself, the impact in the short term may not be too severe.

A guarantor can be made bankrupt where the terms of the guarantee create a debt obligation.

An agreement to pay off part of a judgment debt owed jointly with others will not of itself amount to consideration sufficient to prevent a creditor going against a debtor for the unpaid balance of the judgment.