BUSINESSES URGED TO CHECK LEGAL DETAILS NOW TO AVOID PAYING HEAVILY LATER.
A Warrington lawyer is urging company directors to take action to protect themselves and their businesses in the face of the credit crunch.
John King, of Forshaws Davies Ridgway LLP (FDR), is concerned that businesses are unaware of the implications and personal repercussions of insolvency and are leaving it too late before seeking legal advice.
He also adds that many businesses still did not realise that just a few simple steps could significantly boost their cash flow.
“It’s beneficial to get lawyers involved at an early stage because businesses need to get money in and lawyers can advance the clients’ position within the chain of creditors,” said Mr King, of FDR’s commercial department. “In a market like this whoever is shouting the loudest is going to get paid. So if you’ve not got lawyers acting for you, you’re going to find things very difficult.”
He said small businesses could boost their chances of survival by re-structuring, recovering debts and claiming interest on late payments.
Seeking legal advice now to review contracts and terms and conditions can significantly strengthen a business’s position in the event of future problems.
“If there are issues, businesses need to address them before someone else addresses them,” he said. “They need to take advice, perhaps re-structure, rather than letting their banks or a creditor do it for them.”
It is important that legal advice is sought at the outset of any proposed restructuring to make sure everything is done correctly and that company liabilities are minimised.
“People perceive solicitors as an additional expense, but the cost if they don’t take advice and action could be far greater,” he warns. “If a company is struggling to manage the balance between income and affordable debt it is strongly recommended that legal advice is sought. Not only can advice help businesses assess their options but also help directors reduce any personal liability.”
Many company directors do not realise that they could be disqualified or fined heavily if they continue to trade whilst their business is unable to meet its debts.
Stephen Poyner, also of FDR’s commercial team, has a stark warning for businessmen who bury their head in the sand.
“Company directors need to be aware that they could be held personally liable if they don’t take action to limit risks at the right time. It’s called wrongful trading which effectively means you’re trading while you’re insolvent and can lead to severe financial repercussions.”
Any businesses with a commercial query are urged to seek legal advice as soon as possible and can contact the Forshaws Davies Ridgway team on 01925 230000.
FDR has 18 Members and around 130 staff with expertise in commercial, corporate recovery, commercial and residential property, criminal, family, litigation, wills and probate.
It is Warrington largest law firm and one of the top 20 largest in the northwest.