When suing a limited company, there are a number of checks worth making to improve the chance of enforcement, should that prove necessary.
This article looks at who to sue, their financial status, company name changes, where to enforce and what can be seized.
Who to sue?
Limited companies are, of course, legal entities in their own right, so you will need to sue the business, not the directors or any other individuals working in the business.
The only exception to this will be if you have asked for and been given personal guarantees, normally by the directors. If you do have such guarantees, you will need to sue both the company and the guarantor/s.
You should always sue the registered limited company name, rather than a “trading as” name. However, you can add that as well, for example “ABC Limited trading as Alphabet”. Suing the correct entity is always important, but even more so in the case of restaurants, where the trading name can change quite frequently.
If the limited company is part of a group of companies, you need to sue the actual company, not the group. In the overwhelming majority of circumstances, the group will not be liable for the debt.
Are they solvent?
Before you start your claim, it is worthwhile checking their legal and solvency status, both at Companies House and the Insolvency Service. You may be wasting your time and money chasing a company that no longer exists or has just gone into liquidation.
It is also worthwhile rechecking these facts if you decide you need to enforce any unpaid judgments you have been awarded. High Court Enforcement Officers (HCEO) are not permitted to enforce against a company in liquidation or administration.
If you have concerns about the financial stability of the company, take action as quickly as possible before other creditors do!
Has the company changed name?
Some companies will shut down and re-open as a new business to avoid liability for their debts. If this has happened, it is unlikely the HCEO will be able to seize any assets, assuming they have been transferred to the new company.
However, we do always check that the sale has been completed, including payment made, before the date of seizure. We have been able to seize and remove assets where the transfer had all been done on paper, but the agreed payment had not been made.
If the company has only changed its name, but still has the same company registration number, then it is still the same company as in the judgment/writ and enforcement can proceed.
Where to find them for enforcement?
An HCEO can enforce anywhere in England or Wales where the debtor carries out their business. This means we can attend the registered office address, the trading address, branches, warehouses etc.
Most judgments will have the registered address on them, however when it comes to enforcement, these are often accountants offices and there are no assets belonging to the debtor there. When instructing, it helps a great deal to provide the HCEO with details of all trading addresses and other locations where there are assets.
HCEOs can force entry into commercial premises if necessary, normally by changing the locks.
HCEOs can also enforce against a limited company that is based in a home office. However, they may not force entry, nor can they take any assets that belong to the individual resident. If the enforcement officer believes they belong to the company, he can seize them and the debtor will have five days to prove personal ownership.
What can be seized?
All items that the HCEO has reason to belong to the business may be seized, with the exception of perishable goods. If a third party claims ownership of seized goods, they will need to prove those claims. If you dispute the claim, then a Master will decide through the process called interpleader.
Limited companies may not claim that items are exempt from seizure because they are tools of the trade. This exemption is only available to sole traders who exclusively use the items for their work (and only to the value of £1,350).