One of the most concerning things for directors when faced with 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?
Know Your Rights if Bailiffs Come to Collect Business Debt
- Bailiffs have a legal obligation to give you 7 days notice before appearing at your premises, unless they have a specific court order saying otherwise.
- Ask to see a writ or ‘warrant of control’ which is their official authorisation to act
- If you conclude that the bailiff has no legal authority to visit you, you should contact the relevant creditor as soon as possible, as well as the bailiff’s company.
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.
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. Recent 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: http://www.legislation.gov.uk/ukpga/2007/15/contents.
Amendments to the Tribunals, Courts & Enforcement Act 2007
- Banning landlords from using bailiffs when seizing assets from residential debts without applying to the courts first
- The Introduction of obligatory training and compulsory use of bailiff certificates
- As part of the training bailiffs must now be trained to identify ‘vulnerable’ individuals and report where they need assistance
- The Introduction of clarity surrounding what can be taken by a bailiff and when a bailiff can and cannot enter a property
- More clarity surrounding when bailiffs are allowed to sell the goods once seized
- Bailiffs are now required when applying to the Courts to stipulate: likely means of entry, potential goods to be seized, the expected force required to ‘force entry’ before a warrant is granted and verify how the premises will be secured on leaving.
- Unless Bailiffs have the Court’s permission they will now be required to provide seven days ‘notice’ before taking away assets
- Ending the bailiff’s right to add excessive fees as they must now be fixed
The information provided below is intended to act as a service to our regular website visitors and is not intended to replace legal advice, which you may; or may not require. Should you need appropriate legal advice, please contact us and we will be happy to introduce you to an appropriate specialist lawyer.
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 from your home against what you may have perceived as ‘business debts’.
Sole Traders’ assets that cannot be taken by bailiffs and classed as ‘exempt’
- Family items such as bedding, clothes, household furniture and ‘provisions that the debtor and their family need for a basic level of domestic life’
- Perishables such as: refrigerated foodstuffs, plants, fresh flowers etc.
- ‘Tools of the Trade‘ – critically those items regarded as tools of the trade are also exempt for a sole trader and the definition of same is important: ‘those tools needed by the debtor to do their job or run their business’, for example: PCs, desks, tools, books, vehicles etc.
- An item is only ‘exempt from seizure as a tool of the trade if it is used exclusively’ by the person owing the money so if your wife uses the car – it can be taken as it is not deemed solely for business use. This rule would also apply to an employee who may use your PC too. The watchword is be careful what you define as tools of your trade when asked.
PRACTICAL TIP: The bailiff cannot force entry without a relevant Court Order, however, they are generally allowed ‘peaceful entry’; so as an example, if a window is open they may be able to climb in. Ensure that all windows are closed and watch out for things like the bailiff asking to ‘use your phone’, or to ‘use your toilet’ as this may be used to gain ‘peaceful entry’ and access to your home.
If you have large debts and you need help quickly then by all means call us on 08000 746 757, or email us on firstname.lastname@example.org or use our live chat feature at the bottom right of the page, no strings attached.
Limited Companies: What Can Bailiffs Take?
It is worth understanding that a limited company is a legal entity in its own right, so any debts that belong to the company will not belong to you the director. So in reality, the only assets that can be ‘seized’ or taken are company assets and not personal assets, even if you are a one man limited company. So, even if you are a one man limited company working from home your personal assets cannot be taken, 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 take action against the limited company first before taking action against the director’s personal guarantee. This is not always the case so please be aware as I am aware of cases where the director has been pursued in parallel with the company or in some circumstances before the company – usually when the company is known to be insolvent and pending liquidation for example.
PRACTICAL TIP: Always check any invoices to ensure that it is addressed to the limited company and not the individual director, personally. If the invoice is made out to the director, you must write and let the supplier know that they have incorrectly addressed the invoice. If you do not, the director can be made personally liable as they have a duty to ensure all invoices are correctly addressed.
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.
Limited Liability Partnerships
On the face of it, a limited liability partnership operates the same as a normal partnership, however, is treated the same as a limited company when it comes to seizing any assets. What this means in practical terms is that the debts belong to the limited liability partnership not the partners who are technically ‘members’. So, the personal assets of a member cannot be taken for the limited liability partnership debt.
PRACTICAL TIP: If you are being pursued for a personal guarantees ensure you ask to see the original document to ensure it has not been lost. If they cannot find it then they will struggle to claim the debt – also do not accept liability of the persona guarantee debt when corresponding. This may affect your rights later.
If you have substantial business debts and you need help then by all means call us if you need help on 08000 746 757 or email in the box provided on this site on the Contact us page, no strings attached.
Image courtesy of Stuart Miles / FreeDigitalPhotos.net
Written by: Mike Smith