ClientCo in trouble, unpaid invoices

[jvector]

Hello all, first post. Bit of a long and sorry tale, please bear with me.

Been on a direct B2B with ClientCo for several years. At the start it was just a wee startup - founder plus 2 con developers. N years later it is not much bigger. From the outset I did not have a 'contract' - rather a LtdCo 'agreement' to provide services at £x per week (IR35 measure at the time).

Has been very amiable over the yrs, even got given some shares in the co. ex gratia once, never actually used timesheets, just invoiced each month, invoices generally got paid eventually but CC had cash flow probs sometimes - now the co. is on the rails. Founder has been forced out, Interim CEO did nowt for 6 months, no money coming in. Interim CEO II asks us to throttle down to <~half time in May 2009 to 'help keep things going' while she tries (& fails) to raise funding. We all realise that if the co. folds we get nowt, if we keep it going while a merger/takeover/injection is arranged we have some hope of getting some back pay.

ICEOII has now been in negotiations with USCo who might be interested in a reverse takeover. She says to them, we need some cash to keep things going. Give her her due, she gets some limited cash from them, divvies it out, pays one of my old invoices. That was start of October, pay for May.

I let her know in August that my co needs some revenue. She said then I am free to look for other work and that she has no money available at that time. SInce then I have been doing 'skeleton' level work for them doing server admin, monitoring and support, no devt. Billing 25-50%. And not getting paid. Also JobServing to no avail as yet.

Had a meeting where she said (again) that she could not promise anything about when or even if anything will be paid. She did say she was going to be talking to USCo about another injection and hoped to "have something this month" (October).

Now the ClientCo. must at least have to have some budget to be able to pay certain critical bills like server hosting (who tend to just pull the plug if not paid). I have sent the ICEOII a mail proposing that the oldest of my invoices be paid within 14 days and a schedule agreed thereafter until they are paid in full. I have also pointed out in that mail that my current activities are critical to current operations and therefore should be in that critical category (no, no threat there...) But I feel that it is flogging a dead horse.

Either :

A. She gets another injection from USCo and can do some catchup payment. And then
A1. USCo deal completes sometime early 2010 and they pay outstanding debts. Seems less likely than...
A2. USCo deal completes sometime early 2010 but they wind down the current company and its debts - I suspect that they really want the ClientCo's location and AIM connections rather than the technology/customer base.
A3. Deal falls through, company goes to adminstration.
-or
B. She does not get another cash injection so no immediate payment to me. Subsequently B1, B2, B3 as above.

I worry that if I continue to press before she gets any cash, I am not going to get anything and will only antagonise her. OTOH if there is a possibility of the company being liquidated maybe I should escalate to solicitors letter/county court ASAP so as to be closer to the top of the pile.

I have got fed up with being 'nice' but I am not sure what measures to take next and when.

[rootsnall]

I'll bet the CEO isn't living on thin air !? So there must be some money. Looks like you are being taken for a mug to me. Be as polite as possible but down tools now and start chasing the debt.

[krytonsheep]

You should have taken them to court as soon as they failed to pay on time. When money is tight companies will only pay the suppliers who are taking legal action (it makes sense).

Some companies will even do this when money isn't tight.

[DS23]

the time for nice is gone.

this is your business or theirs.

if they are going under every hour you spend is free work to them so get out now - right now

instigate debt recovery mode via a collection firm immediately. the sooner you do this the greater chance that you will get something back.

and good luck with getting a new contract.

[SuperZ]

You should have taken them to court as soon as they failed to pay on time. When money is tight companies will only pay the suppliers who are taking legal action (it makes sense).

Some companies will even do this when money isn't tight.

Or even better, gotten out as soon as the troubles appeared. I wouldn`t want the hassle of taking a company to court just to get paid, and to do so over and over again

[pzz76077]

Unless client co has a uniquely valuable product that can generate significant cash flows immediately after another cash injection, then realistically you should expect the worst.

Funding is very hard to come by these days, and as an unsecured creditor you stand to not receive anything when the co goes bust.

No point taking legal action against a co that has no money, you will only loose more money on solicitors fees etc.

Key lesson to take away from this episode - cash flow is king, never let anyone owe you money for longer than agreed.

PZZ

As a confidence indicator, you may want to find out which suppliers have been paid and who has not to see how far down the payment pecking order you really are. If you find out that there are x suppliers owed x pounds in the queue ahead of you, it will give you an indication as to how realistic it will be that you will be paid even if there is more funding secured. It will also let you know how much value the co really puts on your services!

[jvector]

Hindsight is a wonderful thing

Thanks to all for the replies. I have drafted another email (a consultant friend is checking it atm) saying that if there is not a positive response by end Wednesday then I will have to consider taking further action which may include (a) ceasing the minimal amount of support I am still doing, (b) applying interest and compensation FWIW (c) sending a solicitors letter demanding payment; and pointing out that if I do (a) the co's operations are at risk and therefore it's a good idea if I do not have to.

It is a crazy situation as I have been told by the remaining perm employee (who I do trust) that the USCo are coming over this week, and will definitely be doing a cash transfer, and going on visits to some of the existing customer base looking for statements of intent for more business. So they have to be interested in keeping the current infrastructure running. I'm wanting to be enough of a squeaky wheel to get their attention but not to jeopardise the possibility of a deal.

pzz's point:

Funding is very hard to come by these days, and as an unsecured creditor you stand to not receive anything when the co goes bust.

No point taking legal action against a co that has no money, you will only loose more money on solicitors fees etc.

I guess I am thinking that if they do get some ££ in then I am more likely to get part of it, and if they don't then as I have read in other threads here those who have made prior claims may get prior attention. (I'm not holding my breath on that, though).

Still, it looks like debt recovery agency or solicitors pretty soon, come what may. I really should not have let it get to this but it always seemed as though it would manage to get fixed eventually. (Just resisted putting in the Suicide smiley here ...)

( pzz also suggested finding out which other suppliers have/have not been paid. Apart from asking the accounts clerk, is there any other way to go about finding that out (I don't actually know who they are, mostly, so not really able to ask direct)?

[Hex]

This may be of use http://www.thomashiggins.com/ - £2 for a letter before action.

[Platypus]

pzz also suggested finding out which other suppliers have/have not been paid. Apart from asking the accounts clerk, is there any other way to go about finding that out ?

<cough>
log onto the accounts system and look in accounts payable