A client refuses to pay. Should I threaten to wind her up?

This article first appeared July 28, 2010.

Dear Aunty B,

I am at my wits’ end. I have a client who refuses to pay our bills. She is known in the industry as a late payer and companies will only deal with her by getting her to pay cash up front. But we are bunnies and after she finally settled her last bill many months late, we have allowed her yet again to run up more debt.

What really infuriates me is I know she recently raised some money and she has paid someone else who wasn’t even overdue, because she needed something from them!

My lawyer has advised me to send a “stat dec” and says that if she then doesn’t pay I can “stop her trading”.

Will this make her pay? And is it a moral thing to do?

Wits’ End,

Dear Wits’ End,

Yes, this will make her pay. It works like this. She gets the creditor’s statutory declaration letter from your lawyer. She can’t understand it so she sends it to her lawyer. Her lawyer (who also hasn’t been paid), rings her up and will ask her if the debt is “real” or is there some dispute about the money owed?

If she admits that she is just paying the bill really, really late as usual (which will really, really annoy the lawyer), then the lawyer will advise her that this is one that needs to be paid and pronto. The reason? Once 21 days after has passed since the letter was issued, you can apply to the court to get the company wound up.

This is probably the most effective way of being paid. She has to take action – such as paying her bill!

However, you do take the risk that she really can’t pay and that the company gets wound up. Then you, as an unsecured creditor, end up with 10 cents in the dollar and have to attend very boring creditors meeting and read very boring reports from accountants.

For some reason I always end up on the creditors committee (sigh.)

Is it a moral thing to do? You bet. She is funding her business on your money. What’s moral about that?

Good luck!

Your Aunty B

To read more Aunty B advice, click here.

Email your questions, problems and issues to auntyb@smartcompany.com.au right now!


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