DCA Threatening business after franchise ended- NOW SD served

[bensward]

An acquaintance has today been contacted by a DCA and I found their approach unprofessional / bordering on harassment.

My acquaintance was severely upset by their behaviour and attitude.

 

I would appreciate your advice on the general situation (though not necessarily the rightness or wrongness of either party's claims).

Is there anything my acquaintance should be doing at this point or should they be awaiting further contact?

 

I am not a lawyer.

Context:

This acquaintance is a director of a limited liability company (A).

That limited liability company paid for services from a third-party (the supposed creditor - B) and in turn had an exclusive franchise for a specific region. The understanding was that the franchise was perpetual and of a similar form to all other franchises provided by B. All contracts / agreements were oral though there is c10 years of historic precedent supporting the existence and nature of those arrangements.

 

Approximately 2 years ago B decided to disenfranchise A and enfranchise a new third party (as it was financially beneficial for B to do so) thereby ending A's sole revenue stream. At that time, an agreement was reached with B that an alternative franchise would be provided though that never materialised. A may have owed B a low five figure sum for services rendered before the termination of the franchise. Following negotiations, as no new franchise was provided, it was understood by A that any sums owed to B were to be cancelled. None of those discussions, or details of sums owed are documented. B did not subsequently send requests for payment.

 

Currently, A has negligible assets and six figure liabilities (including a significant debt to my acquaintance). Any sums owed by A to B were unsecured.

 

Both B and my acquaintance have not been in contact for over 18 months and no requests for payment have been received in that time.

 

Today, a DCA contacted my acquaintance informing them that they required immediate payment.

 

DCA are a small firm (3 family members) and, as far as I can tell, are legitimate - they have a website and no negative media results. From their website, I cannot however determine their company number or if they are a member of any trade associations.

 

As part of the 45 minute conversation between my acquaintance and DCA DCA said:

 

1) Threatened my acquaintance with criminal prosecution and a potential jail sentence for robbery

2) Spoke in legalese referencing c15 different forms and procedures with no intent (/ability) to explain

3) Had no knowledge of the arrangements between A and B

4) Assumed that my acquaintance was fully liable for A's debts and repeatedly stated that claim

5) Became forceful / insistent to the extent that my acquaintance burst into tears

 

I have recommended that, next time they make contact, my acquaintance do the following:

 

1) Request they contact them in writing

2) Request that they stop contacting by phone

3) End the conversation at that point

4) Note key details of the conversation

 

 

Any advice would be hugely appreciated given the distress my acquaintance is experiencing.

 

Thanks,

 

Ben

Edited October 29, 2014 by bensward

[Sidewinder]

Who is the DCA?

[dx100uk]

your recommendations are correct.

 

 

DCA's are not BAILIFFs

and have

 

 

NO SUCH LEGAL POWERS.

name the DCa please

 

 

tell them to go away off next tine they ring.

 

 

dx

[bensward]

Thanks dx100uk - it's reassuring to know.

 

I At the moment I'm going to have to hold off posting the DCA's name but, depending on their next action, I will consider doing so: while I fully support exposing their morally questionable practices I have to balance that with keeping my acquaintance anonymous.

 

Given their small size, I suspect that the DCA could easily identify A from this thread. If this eventually goes to court I would not want anything I've posted here to have any bearing on the case.

 

Ben

[dx100uk]

Given their small size, I suspect that the DCA could easily identify A from this thread. If this eventually goes to court I would not want anything I've posted here to have any bearing on the case.

 

 

then I question the usefulness cag can be if everything is secret squirrel

 

 

dx

[numbers666]

4) Assumed that my acquaintance was fully liable for A's debts and repeatedly stated that claim

 

Nope - it is a LTD company. UNLESS the director gave a PG to B.

 

If there are no assets within the company, advise wind it up as there is no revenue.

 

I will make more response when not at work.

 

Part 31 of companies act 2006.

'http://www.companieshouse.gov.uk/about/gbhtml/gp4.shtml'

[bensward]

I have an update on this issue:

 

The DCA stopped contacting my acquaintance after being told that all future communication should be in writing.

 

-

 

However, a Statutory Demand has now been served on Company A (the limited liability company as opposed to the director) for the full perceived liability.

 

Though my acquaintance still strongly believes they could challenge the legitimacy of the debt;

given the company has no assets and no revenue stream

- they currently plan to ignore the demand and fully comply with any subsequent liquidation / wind-up proceedings.

 

My acquaintance will also send a letter to the creditor to inform them of the company's lack of assets

to ensure that there they are aware of Company A's current financial situation.

 

---

 

Also, though this feels like a technicality..

. the creditor on the demand letter is not the original creditor (and this can be easily evidenced through invoices and receipts).

 

 

Nonetheless, the original creditor and the creditor on the form are closely linked (and probably share owners).

 

 

For the sake of wasting the creditor's time/money,

 

 

can my acquaintance reasonably request that the statutory demand is set aside based on wrong name?

 

---

 

I appreciate this is now off topic and relates more to insolvency than debt collection agencies,

 

 

any input would be extremely appreciated as my acquaintance has no legal representation.

 

In particular,

any feedback on my acquaintance's proposed next steps would be helpful,

 

 

as would any inputs on risks/issues which not disputing the statutory notice might introduce.

 

Thanks,

 

Ben

[dx100uk]

if another 'creditor' has issued an SD in their name

 

 

they would need to prove they inherited all the assets and accounts of the old company for this to stick me thinks.

 

 

dx

[numbers666]

Ok.

 

An SD has been issued albeit in the incorrect creditor name (controlling group ?)- treat this a guns drawn ready to fire. A BR petition can be filed if this is not set aside in HC (or court dealing with HC matters).

 

The question is as there is no revenue - I assume no assets in this case, whether the director wishes to contest any possible action ?

 

This is a good guide by the IS http://webarchive.nationalarchives.gov.uk/+/http://www.insolvency.gov.uk/pdfs/guidanceleafletspdf/guidefordirectors. pdf - take the space out between dot and pdf.

 

You will need to consider if you wish the become a company director again - the IS can take action as below

 

https://www.gov.uk/company-director-disqualification

 

Please remember this is not legal advice or a course of action advocated - there may be other issues involved, but in this situation, prima facie, if it was me, a company not trading, no assets, a debt (alleged), i would let them throw money at it, and be relieved when its all over.

 

It will cost money to set aside, which the company can ill afford, and I would imagine the technicality of name is insignificant (would certainly prolong things tho).

 

Chris

[bensward]

Thanks dx100uk and numbers666.

 

Agreed - it feels like there is no point contesting the demand and there is also no appetite to extend timelines purely to be annoying. The company's assets are minor (4-5 figures) and liabilities are 6 figures. The directors are the largest creditors.

 

I don't think the directors can be accused of unfit conduct - the solvency issues all arise from the termination of the franchise and the subsequent failure by the creditor to provide the promised new franchise. If it were to go down that route, legal advice would be sought.

 

• The company was profitable with a perfect trading record, until the franchise was unexpectedly terminated. Given the alleged debt is to the firm which terminated the franchise, there cannot have been any element of deception.
  No major purchases were made after the franchise was ended and all subsequent trading was to reduce inventory (and thereby storage costs etc.) with a view to winding-up company. Until this statutory demand was received, it was feasible that all other creditors (excluding directors who would have accepted write-off of their loans) would have been paid back from sale of inventory.
  
• All accounts and company documents are up to date. Latest accounts about to be submitted. Directors personally paying accountancy and bookkeeping fees.
  
• No tax is owed by the company. Company's largest asset is a tax refund due from HMRC.
  
• No company money has been used for personal benefits. The directors have been providing personal funds to allow for critical activities to continue (e.g. accounts). Company assets are all unusuable for non-business purposes (single-purpose industrial equipment).
  

Thanks,

 

Ben

[numbers666]

No Worries Ben,

 

Again yet another small business fails through no fault of its own. The increase in these liquidations / WO's is shocking in recent years.

 

Hope all works out in the end for friend.

 

C