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Unpaid final instalment from company sale

The second case in Learning from Recovery - a series of case studies with lessons to learn about debt recovery

Oliver Cummings Sep 15, 2020

Just three months after launching our Recovery service, we have helped many of our accountants recover debts for their businesses and their clients' businesses. Now, we are sharing these lessons with you.
 
Learning from Recovery series not only looks at successful debt recovery cases but also shows situations that could have been avoided with earlier action and hindsight (read our first post about a large supplier that forced an SME into liquidation). These learnings can help you build a recovery service for your clients and get them the capital that they are owed. 

 

Example 2: Recovering missing instalment from company sale

This week's case involves a missing final installment of a company sale and the aquirier using their financial strength to stop the settlement.
 
An entrepreneur sold their PR company, with the purchase price to be paid in stages. However, the final instalment of £250,000 was unexpectedly not received.
 
When the entrepreneur approached the parent company for an explanation, they were told that there had been a breach of contract. They engaged a legal professional to explore the claim and ended up spending £20,000 in legal fees but no progress was made.


Having failed to make any meaningful headway, the entrepreneur increasingly felt that their only option was to write off the monies owed to them. Luckily, when they sought advice from their accountant in relation to the relevant tax treatment, the accountant referred them to Escalate, our Recovery partner.
 
The case followed the normal mediation process for the full three-month period before moving to the litigation stage. Aware that there was no legal merit to justify withholding payment, the defendant tried to delay the process (threatening to counterclaim, requesting to switch the case from a regional court to London, and asking for an extension of time) to frustrate the claimant and increase ongoing costs so they would drop their claim.
 
As the claimant held no financial risk through the Escalate Recovery process, these attempts to dissuade them from pursuing their case had no impact – in fact, they only increased the defendant’s own costs.
 
Escalate continued to push for a full settlement. Six weeks after the mediation, we secured £325,000 for the client as the defendant was forced to concede once its costs became unsustainable. The total cost to the defendant – including its legal fees – in its pursuit to delay the claim amounted to around £450,000.

Learnings

Even though the entrepreneur had already spent £20,000 on legal fees to pursue this debt, the money was still recovered.
 
This highlights two of the benefits of the no-win-no-fee service.

  • There are no upfront legal fees for your client
  • With no financial risk for your client, all the defendants strategies to dissuade the claimant from pursuing the claim failed as our partner Escalate is insured to take the case all the way to the high courts if needed.

If your clients need support recovering a debt or if you want to know more about adding Recovery to your firm's service offerings, just book in a call at a time that suits you. 

 

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