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?
What Can Bailiffs Take from a Limited Company?
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 and not personal assets, 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.
Bailiffs can take the following from a limited company:
- Inventory or Stock
- Office Equipment
- Company vehicles
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.
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.
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: https://www.legislation.gov.uk/ukpga/2007/15/contents.
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’.
What Can a Bailiff Legally Take from My Home?
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 0800 074 6757, or email us on email@example.com or use our live chat feature at the bottom right of the page, no strings attached.
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.
What Can Bailiffs Take from a Limited Liability Partnership?
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.