When a limited company has unpaid debts, the creditors to which it owes money have the right to appoint a bailiff to retrieve what is owed.
If your company is in debt, it can be a stressful time. Therefore, if you believe that you might face a visit from the bailiffs, it is critical to understand exactly what bailiffs can take.
Clarke Bell has collated this useful guide explaining what powers bailiffs hold and a guide to your rights, so you know what steps to take next.
What is a Bailiff?
First, we will start by making an important distinction between the two types of bailiffs there are, namely High Court Enforcement Officers and debt collectors.
Each holds different powers, meaning it’s important to identify which type of bailiff is threatening action against you.
A High Court Enforcement Officer is appointed by the courts. This means they have greater powers than a debt collector and can forcibly enter a property in the case that they have been unable to gain entry through any other means.
A debt collector, on the other hand, is appointed by a creditor that is owed money. For this reason, they do not have the same powers that High Court Enforcement Officers do.
A debt collector has the power to request that you repay the outstanding debt and can send reminders to do so. They are able to collect the money owed for the debt, which can include credit cards, loans and utilities.
However, unlike High Court Enforcement Officers, a debt collector cannot force entry to a property and can only enter with the permission of the property owner. A debt collector must leave if they are asked too, and don’t have the power to enter a property unless invited in.
When the debt is owed by a limited company, the debt collector will aim to agree on a repayment plan with the debtor before visiting their premises. If they are unable to reach an agreement, the bailiff will then visit the business address with the aim of taking goods equal to the value of the outstanding debt.
What can bailiffs take?
If you are facing action from bailiffs, it is important to know your rights. After all, bailiffs can only take certain assets from a limited company. These assets will be collected as a form of payment to settle the debt.
A bailiff can only seize assets belonging to the company due to the fact that a limited company is a separate entity from its directors. Therefore, the director’s personal assets can’t be taken by bailiffs.
In fact, the bailiff is only entitled to visit the registered business address and not the director’s home.
Upon their first visit to the registered business address, the bailiff will collate a list of assets that can be seized and sold to cover the outstanding debts.
So, what can a bailiff take?
Assets that a bailiff can seize include money, stock or inventory, any vehicles belonging to the company, machinery and any office equipment.
However, as we have mentioned, there are certain things that a bailiff cannot take. These include rented property, vehicles that display a disabled badge, items that are leased or under a hire purchase agreement, any asset that do not belong to the business and assets that are crucial to the business with a value worth up to £1,350.
What are my options?
If you are facing action from the bailiffs, it is best to repay the debt in full.
However, this is not always possible. If this is the case, you will have a number of options open to you.
The first is to come to a repayment agreement.
The director can negotiate a full repayment plan, whether formal or informal. This will avoid the company assets being taken.
Where a payment plan is in place, the business can hold on to its assets on the basis that the outlined terms in the plan are met. The director must also sign a Controlled Goods Agreement.
An informal repayment plan can be drawn up, which will outline when and how you will repay the amount owed. A common example of this is the Time to Pay Arrangement between debtors and HMRC regarding tax related debts.
Company Voluntary Arrangement
Or, the business can enter into a formal repayment plan, such as a Company Voluntary Arrangement.
This is a formal agreement made between the debtor and creditor which outlines how and when the debt will be repaid. Whilst the company is in a CVA, the director remains in control of the business, which is allowed to continue to trade. This is a good option for businesses looking to turn around and restore profitability whilst paying off their debts.
Read more about a Company Voluntary Arrangement and the advantages of this option in our handy guide.
The final option is to close the business. This might be the best option if the business debts are severe, there is not a feasible way to repay them and chances of business recovery are limited.
If this is the case, you must close the company in the correct and legal manner. This is usually done through a Creditors’ Voluntary Liquidation (CVL) which you can read more about here.
Whatever your situation, Clarke Bell is here to help
If your limited company is facing action from bailiffs, Clarke Bell is here to help advise on the best way forward for you.
We will look at your particular circumstances to assess what the best option is, whether that is to draw up a repayment agreement through a CVA, or whether closing the company through a CVL would be more suitable.
Whatever the situation, it’s important to act quickly to ensure more options remain open to you. To see how Clarke Bell can help, why not get in touch?