Simon Fraser of Hussey Fraser offers some advice on dealing with bad debts.
The recovery of monies due is an obvious priority for all businesses at the moment. This is particularly true for suppliers of goods and services, such as the members of Hardware Association Ireland (HAI).
Understanding the legal avenues and remedies available to your business as a creditor of another, and the defensive steps that may be taken to protect your company in the event that a demand is made of you, will assist in devising strategies to secure prompt payment on the one hand and avoid difficulty should a creditor persist and prosecute claimed entitlements. Each company will of course have its own systems of credit control, but, should those systems prove ineffective, the next step is to consider the issue of legal proceedings for debt recovery.
Issue of Court proceedings Proceedings may be issued in the District Court (upper limit €15,000), Circuit Court (upper limit €75,000) or High Court, for all debts in excess of €75,000. For claims that do not exceed €2,000, the District Court offices provide a small claims procedure which is designed to handle consumer and business claims cheaply without involving lawyers. An application can be made online and the fee is €25. If the matter is not resolved the claim will be brought to the District Court.
Once proceedings have been issued and served, and assuming that an Appearance has been entered, the next step is to progress the proceedings. Each of the different courts (the District, Circuit and High Courts) has different systems.
Options available for enforcement after Judgement is received
There are a number of options available for enforcement once judgement has been obtained. These include Publication of the Judgement, the Sheriff, a Judgement Mortgage, Garnishee Proceedings, an Injunction and issuing a petition to wind up a limited company.
Entitlement to Interest
Under the EC (Late Payment in Commercial Transactions) Regulations 2012 (S.I. No. 580 of 2012) (the Regulations), a supplier is entitled to interest if payment for commercial transactions is late. The Regulations apply equally to public and private sectors and provide that, unless otherwise specified in an agreed contract, the interest rate will be the European Central Bank main
refinancing rate (as at 1st January and 1st July in each year) plus 8 percentage points. With effect from 1st January, 2015, the late payment interest rate is 8.05% per annum which equates to a daily rate of 0.022%. Interest due for late payments should be calculated on a daily basis. An appropriate claim for interest should be included in all claims for debt recovery.
The Regulations apply to payments for commercial transactions but not to transactions with consumers.
This Business Support article featured in the May/June 2015 edition of The Hardware Journal.