This Conference calls upon Her Majesty's Government to incorporate the New Zealand Companies Act 218 notice into UK law. This allows creditors of a limited liability company to recover an overdue debt by serving a statutory demand on the registered office of the debtor company giving them 15 working days to pay the debt after which liquidation proceedings against the debtor company can be started and giving the claimant priority over the receivers.
Proposer: Nicky Rayment (NR), York Branch
Seconder: Andrew Machuthchon (AM), York Policy
Policy Respondee: Roger Bibby (RB), Chairman, Economic Taxation and Financial Affairs Policy Unit
The Motion was passed
Personal Votes For: 102
Personal Votes Against: 54
Branch Votes For: 64,307
Branch Votes Against: 28,751
Chaired by Colin Wilman (CW)
NR explained why she bought the motion.
Please disregard the briefing notes; they are not the information that was submitted with the motion. This motion is intended to help small businesses.
Owing to the economic recession many business are failing even though on paper they are solvent. Many larger companies have extended their payment terms with no reference to their creditors. The 289 notice deals with this and I propose that the UK adopts this. If a 289 notice is served debtors have a priority claim before the receivers, as often there is nothing left after the receivers have finished.
As a result of unpaid credits, businesses in the UK are owed £193 billion. Many invoices are not paid until 64 days after issuing.
Late payments of invoices are an acute cause of business failure.
There are 2.1 billion invoices overdue each year, the UK has the worst record in Europe. There is £147 billion available in compensation, but how many of us actually claim it.
Almost a third of SMEs would go bust with only £20,000 owed. The average amount outstanding is usually £30,000.
72% of business owners claim that late payment has a serious impact on their business.
The demand must be served on the registered office of the debtor company. The company has 15 days to pay or make an arrangement to do so. If they don't they have 30 days as evidence of non-compliance, and then liquidation can be served.
The creditor has a prior claim over the receivers.
Seconder - AM
Why do we have the worst reputation in Europe? Because we all have to defer and avoid payment because we are not being paid. Many of our customers don't pay and won't pay, except on their terms. Some customers take 90 days + and use you as an unofficial bank to fund their own payment. The NZ act 289 replaces much of the uncertainties of the current system. I wish you to support this motion.
Policy opinion - RB
The background is slow payment which is a problem for all of us. We need to think about the legal process, operationally, and then legally. For example sales office often have badly organised invoice systems. Invoices often don't match the quotations, terms or trade are not explicit, or they are out of date. All these give problematic creditors excuses not to pay on time.
Credit control is another aspect.
In terms of existing legal system, CCJs are not helpful to businesses as they are monitored by credit control agencies.
Regarding this motion, be careful what you wish for. There is a risk of precipitive action of putting the company into liquidation.
Christopher Storey (CS), Suffolk opposed the motion.
This motion could be used for great harm to SMEs as large businesses will not hesitate to use it and small businesses using it will often lose their contracts from other businesses due to their reputation.
Many claims for money are disputed on contractual grounds and these need to be understood before they can be disputed.
Peter Barton (PB), East Anglia Supported the motion
You can only use the statutory demand if you have an undisputed debt and it would stop insolvency practitioners making money out of it. We therefore support the motion.
Karl Craig West (KCW), Leicestershire, Opposed the motion
This is not a bad idea, but it is completely unworkable. The government would never let small companies threaten a company like BT for example with liquidation. I have spoken to people in New Zealand and it just isn't used. There is serious damage that could be done to the small businesses community as a whole. Will we use this against each other? This could be seriously badly used by those who have the time and resources to put it into effect, and that is not us it is big businesses. The intent of this is no bad thing, but it is small businesses who would suffer. It is a well intended motion and well intended solution. We therefore oppose the motion.
Michael Wilkinson (MW), West Yorkshire branch Supported the motion
There are aspects of this we can already do, we don't have to stand in front of receivers with this, and they take the vast bulk, or all of the money left in a situation such as this. It doesn't matter if you use the CCJ system and then move to statutory demand, please use the law that we have but also vote for this and give us the chance to fight against the receivers.
Proposer - closing comments
NR - in reply to KCW, they do use it in NZ I know people who have. Before a statutory demand is issued, you exhaust all other avenues, this is extra leverage, if they can pay, they will pay.
Why should SMEs suffer when they have given the service or given the goods? For e.g. Unilever take up to 90 days, but only allow 28 days for payment to them.
Please support the motion.
Voting then commenced.