Getting Clear on What Bailiffs Can Take
One of the most concerning things for directors when faced with insolvency and business debt is bailiffs seizing assets for creditors and the impending bailiff visit itself.
The level of stress can increase when HMRC enforcement officers are involved. So what should you be aware of when you are threatened with a visit from a bailiff and what can they take?
What Can Bailiffs Take From a Limited Company (Ltd)?
What Bailiffs Can Take from an Ltd
Bailiffs can take the following from a limited company:
- Company money
- Machinery belonging to the company
- Inventory or stock from the company
- Office Equipment belonging to the company
- Company vehicles
What Bailiffs Cannot Take from an Ltd
As a limited company is a separate legal entity from the directors, bailiffs are not allowed to take items belonging to you personally. If you have signed a personal guarantee this may affect you personally, however, if you have not signed a personal guarantee then bailiffs cannot take the following:
- Anything on lease, or hire purchase (as it technically belongs to someone else).
- Personal money.
- Your personal car.
- Personal jewellery.
- Items that you own, personally and are used for business use, such as books, laptops, tools, etc.
What Does this Mean for Me, as a Director?
It is worth understanding that a limited company is a legal entity in its own right, so any limited company debts will not belong to you, the director.
So, in reality, the only assets that can be ‘seized’ or taken are company assets , not personal ones, even if you are a one-man limited company. So, even if you are a one man company working from home your personal assets of directors cannot be seized, despite what may be indicated on any ‘seizure notice’ including those from HMRC. The only exception to this rule would be if you had signed personal guarantees in which case your personal assets may be vulnerable.
Also be aware that the ‘Tools of the trade’ rule does not apply to a limited company, so there are no ‘exemptions’ as such, as there are with a sole trader.
Typically, if there is a personal guarantee the creditor will usually (though not always) take action against the limited company first before taking action against the director’s personal guarantee.
What Does this Mean for My Company?
The removal of key items and assets that may be used as a foundational part of your business can clearly have a detrimental impact in some cases.
Depending on the types of assets that are vulnerable for seizure, it may negatively impact your company and its ability to trade.
Can a Bailiff Force Entry to My Office?
Unless bailiffs are high court enforcement officers with a warrant signed by a judge, they cannot force entry to your office, ever!
Even court appointed bailiffs cannot just turn up for the first time and force entry. They are allowed to enter if they have previously entered and drawn up a list of goods to be removed, and not otherwise.
What is the Process for a Bailiff Visit?
Assets are Not Taken Immediately
First of all your trading status will affect the action they can take. It is also worth noting that the term ‘seizing’ assets is generally used as a reference to denote what assets are vulnerable. However, this does not mean that they will be taken immediately.
They will be ‘noted’ in a ‘seizure list’ which you will be expected to sign for verification purposes, however, they may not be taken away at that point.
You will usually be given time to raise funds before the assets are taken and sold at auction. The response of the bailiff will depend on a number of factors surrounding your case including the brief the bailiff has.
Fees and Costs Will be Added to Your Debt
The bailiff brief is likely to include what type of business you are; what type of assets you are likely to have; your attitude and past experience; trading address and the size of the debt.
Keep in mind that any bailiff visit will incur costs and these costs will be added to the outstanding debt and there has been a lot of controversy over these costs for quite some time.
Changes to the Tribunals, Courts & Enforcement Act 2007 should help keep these to a minimum and add clarity. You can learn more about the governing law here: https://www.legislation.gov.uk/ukpga/2007/15/contents.
What Can Bailiffs Take from a Limited Liability Partnership (LLP)?
A limited liability partnership (LLP) operates the same as a normal partnership. However, it is treated the same as a limited company (Ltd) when it comes to seizing assets. What this means in practical terms is that the debts belong to the limited liability partnership and not the partners, who are technically ‘Members’.
The personal assets of a Member/Partner cannot be taken for the limited liability partnership debt unless a personal guarantee has been signed.
PRACTICAL TIP: If you are being pursued for personal guarantees, ask to see the original document to ensure that it has not been lost. If they cannot find it, they may struggle to claim the debt.
Sole Trader Threatened With Bailiff Action
If you are a Sole Trader threatened with bailiff action, there is no difference between personal debts and business debts. In practical terms, this means that the bailiff can take personal assets that are considered non-basic domestic items from your home. These items can be taken as payment/partial payment against what you may have perceived as ‘business debts’.
However, they cannot take things that are considered to be basic domestic items such as a washing machine, furniture, or a cooker. They can also not take things that do not solely belong to the person owing the debt.
Can a Bailiff Force Entry to My Home?
The bailiff cannot force entry without a relevant Court Order. However, they are generally allowed ‘peaceful entry’; for example, if a window is open, they may be able to climb in.
We have been informed from business owners that some bailiffs have also been known to ask to ‘use your phone’ or to ‘use your toilet’, and this was used to gain ‘peaceful entry’ to their homes.
What Can Bailiffs Take from a General Partnership?
In general terms, the partnership assets owned by a partnership to be seized first before taking action against the individual partners’ personal assets. When debts are called in personally unless otherwise stipulated the debts are treated as being joint and severally owned from the date of becoming a partner. Essentially, this means the creditors will take their money from the partner with the most assets/cash available.
PRACTICAL TIP: It is worth noting the partnership assets cannot be seized if one of the partners is being pursued.
Directors should be aware that bailiffs are not allowed to take personal assets belonging to the director, unless they have signed a personal guarantee.
This means that personal assets such as personal money, a personal car and personal jewellery cannot be seized.
However, company assets such as company money, machinery, inventory, office equipment and company vehicles may be seized.
If a bailiff is due to visit, the director has the right to ask for 7 days notice before the Bailiff appears at the premises, unless there is a specific court order. They also have the right to ask to see a High Court writ or “warrant of control” which is the bailiff’s official authorisation to act.
Bailiffs cannot force entry to a office unless they are high court enforcement officers with a warrant signed by a judge. If assets are noted in a seizure list, the company may be given time to raise funds before the assets are taken and sold at auction. Additionally, fees and costs may be added to the debt.