Debt recovery: Legal action for unpaid invoices

If you have rendered an invoice to a client or customer company, and the debtor has not paid the invoice, then you will need to consider debt recovery options. A creditor’s approach to debt recovery will vary depending on the individual circumstances of the case. In some circumstances, a warning letter or email from solicitors will induce a debtor company to pay what is owed. Should this be fruitless, then a statutory demand can be issued (which is the pre-cursor to legal action for an unpaid invoice). Should the debtor still not pay, then a creditor has the option to petition the court to wind up the company. There are many ways to get money owed for an overdue invoice.

To date, we have a 100% success rate and all of the petitions we have issued have been resolved in our client’s favour. This has also meant that the petitioned company or individual has paid our fees. Luckily for our clients this means instructing us to pursue their bad debts has ultimately recovered the sums owed plus interest with a refund of their legal costs.

How to recover money from a client who won’t pay

You can get a client or customer to pay an unpaid or overdue invoice in the following ways:

  1. Send a warning email or letter;
  2. Threaten legal action in a letter of claim;
  3. Negotiate a payment plan with the debtor;
  4. Instruct solicitors to correspond with the debtor company;
  5. Issue a statutory demand; or
  6. Serve a winding-up petitions

What if your client won’t pay an unpaid invoice: Letter of Claim

Before court proceedings are commenced, a creditor should consider sending a Letter of Claim to the debtor.

The Letter of Claim should contained the following information:

  • the amount of the debt;
  • whether interest or other charges are continuing;
  • where the debt arises from an oral agreement, who made the agreement, what was agreed (including, as far as possible, what words were used) and when and where it was agreed;
  • where the debt arises from a written agreement, the date of the agreement, the parties to it and the fact that a copy of the written agreement can be requested from the creditor;
  • where the debt has been assigned, the details of the original debt and creditor, when it was assigned and to whom;
  • if regular instalments are currently being offered by or on behalf of the debtor, or are being paid, an explanation of why the offer is not acceptable and why a court claim is still being considered;
  • details of how the debt can be paid (for example, the method of and address for payment) and details of how to proceed if the debtor wishes to discuss payment options;
  • the address to which the completed Reply Form should be sent;
  • enclose an up-to-date statement of account for the debt, which should include details of any interest and administrative or other charges added;
  • enclose the most recent statement of account for the debt and state in the Letter of Claim the amount of interest incurred and any administrative or other charges imposed since that statement of account was issued, sufficient to bring it up to date;
  • where no statements have been provided for the debt, state in the Letter of Claim the amount of interest incurred and any administrative or other charges imposed since the debt was incurred;
  • enclose a copy of the Information Sheet and the Reply Form at Annex 1 to the Pre-action Protocol for Debt Claims; and
  • enclose a Financial Statement form (an example Financial Statement is provided in Annex 2 to the Pre-action Protocol for Debt Claims – the Statement is part of the Standard Financial Statement and can be downloaded from

Interest on late commercial payments

If you have been paid late on an invoice rendered commercially, then your business could be entitled to compensation from the debtor under the Late Payment of Commercial Debts (Interest) Act 1998. If an invoice is not paid on time, then a creditor is entitled to claim compensation from a debtor- even if there was no provision for interest or late payment in the invoice.

Can I claim debt recovery costs on late payment?

  1. A creditor has supplied goods or services;
  2. A debtor has bought by way of business;
  3. The contract is not a consumer credit agreement; and
  4. The contract does not have a provision for interest.

How much late payment compensation can be claimed for an unpaid invoice?

Late payment compensation under the Late Payment of Commercial Debts (Interest) Act 1998 is as follows:

Amount of the unpaid debtLate payment compensation
Up to £999.99£40
£1,000 to £9,999.99£70
£10,000 or more£100

Unpaid Invoices Legal Action: What is a statutory demand?

A statutory demand is in essence a demand for payment of a debt served upon an individual in accordance with s. 268(1)(a) Insolvency Act 1986. It is a document served by a creditor upon a debtor that is intended to prove that the debtor owes the specified sum of money.

statutory demand is the first legal step to winding up a debtor company or making an individual bankrupt, if the debt is for more than £750 or £5,000 respectively. A statutory demand is capable of being served as soon as the debt is due. If a creditor is owed money and wants the debt paid quickly, taking legal advice on serving a statutory demand is recommended.

Should I serve a statutory demand for an unpaid or overdue invoice?

Creditors often serve a statutory demand as a more cost-effective and speedier method to ensuring the debtor pays the debt rather than instigating court proceedings (initially anyway). Preparing and serving the statutory demand (depending on the quantum of the debt and the facts of an individual case) could potentially be done relatively quickly (with the cost of a process server included). Given that this process does not involve the Court, there are no added court fees or delays seeking listings of applications (unless the debtor challenges the statutory demand e.g. if the debt is disputed).

A statutory demand starts the time running for a debtor to honour its debts, as once served, the debtor has 21 days within which to pay the debt.

Moreover, a statutory demand carries a threat of bankruptcy (or winding-up if served upon a company), and could focus the mind of a debtor to ensure re-payment of the sums is expedited or engage in settlement negotiations.

How to recover bad debts from customers: Statutory Demand Template Example

The format of a statutory demand must follow the guidelines set out in the Insolvency Rules 2006, but it is not a court document.  Although the demand is dated at the time of issue, it does not expire.  The time limits to deal with a demand only apply from the date of service.

Pursuant to Rule 10.1 Insolvency Rules 2016, the contents of a statutory demand are as follows:

  • the heading either “Statutory demand under section 268(1) (debt payable immediately) of the Insolvency Act 1986” or “Statutory demand under section 268(2) (debt not immediately payable)”;
  • identification details for the debtor;
  • the name and address of the creditor;
  • a statement of the amount of the debt, and the consideration for it (or, if there is no consideration, the way in which it arises);
  • if the demand is made under section 268(1) and founded on a judgment or order of a court, the date of the judgment or order and the court in which it was obtained;
  • if the demand is made under section 268(2), a statement of the grounds on which it is alleged that the debtor appears to have no reasonable prospect of paying the debt;
  • if the creditor is entitled to the debt by way of assignment, details of the original creditor and any intermediary assignees;
  • a statement that if the debtor does not comply with the demand bankruptcy proceedings may be commenced;
  • the date by which the debtor must comply with the demand, if bankruptcy proceedings are to be avoided;
  • a statement of the methods of compliance which are open to the debtor;
  • a statement that the debtor has the right to apply to the court to have the demand set aside;
  • a statement that rule 10.4(4) of the Insolvency (England and Wales) Rules 2016 states to which court such an application must be made; and name the court or hearing centre of the County Court to which, according to the present information, the debtor must make the application (i.e. the High Court, the County Court at Central London or a named hearing centre of the County Court as the case may be);
  • a statement that any application to set aside the demand must be made within 18 days of service on the debtor; and
  • a statement that if the debtor does not apply to set aside the demand within 18 days or otherwise deal with this demand within 21 days after its service the debtor could be made bankrupt and the debtor’s property and goods taken away.

Can I petition to wind up a company that owes me money?

Typically a creditor asks a solicitor to wind the debtor company up to recover debts which exceed £750, or to stop the company making its debts worse.

An application is made to the court (this is the petition) to seek an order to wind the company up. Directors should react when a petition is received; the consequences are that you could lose control and/or even face personal liability for the debts.

The Court will grant a hearing date to “hear” the petition. If the company does not respond, or if no defence is mounted, then its usually a matter of the judge issuing the order to wind up.

Will I recover my unpaid invoice if a debtor company is wound up?

Yes, if you are a secured or petitioning creditor and the company has assets to satisfy the debt. Upon winding up all the assets of the company are collected and distributed amongst creditors. The company will continue to carry on business and can enter and complete transactions but only for the purpose of winding up its’ affairs in the interest of creditors and shareholders.

However any other transactions entered into will be void and no contracts can be executed by the company. As a whole from the moment the company is wound up the company is stopped as a going concern.

Should I take a debtor to court if they owe me money?

It depends on how much is owed and whether pre action threats, warnings or discussions do not lead to much. If a simple warning email or letter from solicitors does not make the debtor pay what is owed, and in the case where large sums are owed, then court action may be your only option.

If you are owed more than £750 by a company and the debt is undisputed (for example a judgment debt) or you are a company facing a winding-up petition, we can negotiate on your behalf and advise you through the insolvency and Companies Court process. Our Winding-Up Experts are able to give specialist legal information and advice to you.

Business debt collection: We keep debt recovery simple

We are lawyers that specialise in recovering unpaid debts from individuals or companies so we know the best way to get your unpaid debts paid up quickly. This may involve Insolvency or Litigation proceedings.

As a result of our success we are now able to offer clients a proactive debt recovery package for a small fixed fee (which is likely to be refunded!).

If you require any further information please do not hesitate to send an email or give us a call.

Instruct Specialist Unpaid Invoice Solicitors

We are specialist Late Payment Act solicitors and have helped businesses recover all the debt that is due to it. We can review terms of payment and re-draft them for your business to ensure that your business is protected in circumstances where a debtor does not pay you what is due. We can claim interest and compensation from debtors on your behalf; send late payment demands; letters before claim and issue Court proceedings (claiming the debt, interest, compensation and reasonable costs of debt recovery); and enforce Court judgments.

We are a specialist City of London law firm made up of Solicitors & Barristers and based in the Middle Temple Inns of Court adjacent to the Royal Courts of Justice.  We are experts in dealing with matters surrounding insolvency in particular issues.  Our team have unparalleled experience at serving statutory demands, negotiating with debtors/creditors, setting aside statutory demands and both issuing and defending winding up petitions vigorously at the Royal Courts of Justice (Rolls Building), or the relevant High Court District Registry or County Court with jurisdiction under the Insolvency Rules.

Call Now Button search previous next tag category expand menu location phone mail time cart zoom edit close