How to recover debt from a limited company
recovering debt from a business
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A limited company, by its very nature, is designed to provide some protection against legal claims – meaning the individuals who run the company might not be held liable for the failings made by the company itself.

This can seem unfair, especially if you know the individual concerned was personally responsible for failing to pay you what you were owed, but ultimately it might be impossible to make them pay, especially if the company has been wound up.

However, you are not left entirely without protection either, and there are certain situations in which you may still have a good chance of claiming your money back – here are just a couple of specific examples, but this is by no means an exhaustive list either.

First of all, are you certain the debtor is a limited company, or is it possible they are a sole trader simply putting a brand name at the top of their stationery?

It’s a crucial difference, and although it might sound obvious, it is worth doing a search online to check that their ‘limited company’ is indeed registered with Companies House.

Next, is the company still trading? If it is, there is a better chance of getting what you are owed, partly because the debtor may want to avoid a winding-up petition, but also simply because there is still an active company capable of paying it to you.

The smaller the firm, the more likely it is to have cash flow problems, so again it might be worth checking Companies House records (some websites allow you to do this for free) to see how solvent the limited company is.

Consider making a statutory demand, giving your debtor 21 days to settle their account or to reach an agreement with you, for example to pay you in instalments.

Once the 21 days are up, you can launch winding-up proceedings if you are owed more than £750 (but be aware that this threshold seems set to rise substantially in the not too distant future).

Usually the threat of a winding-up petition will be enough as a last resort to kickstart your debtor into taking action to repay what they owe you.

Finally, you may still be able to take action against the former directors of an insolvent company, if they took actions during its insolvency that were not in the best interests of creditors.

This is a fairly specific situation, and could be difficult to prove, but in extreme circumstances it could allow you to recover at least some of what you are owed, or have the former directors disqualified from running a company for as much as 15 years, so they cannot do the same thing to anybody else.

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