There is nothing worse than when an invoice goes unpaid month after month after month. If your company is already under pressure financially and you quite literally need that money to pay your suppliers, it can be a very tense situation.

You could continue chasing, add late payment fees and interest, and even threaten legal action. The final option (if you have already issued a statutory demand and the 21 days has expired) is to issue a winding up petition which, if successful, would force the company into compulsory liquidation.

The energy suppliers are taking action

Research by law firm Harcus Parker has found that energy suppliers are taking action against business customers to reclaim their energy debts using winding up petitions.

Over the last decade, suppliers including British Gas and Eon, have made 400 attempts to forcibly close down companies to reclaim money owed to them. In the first four months of 2023, 30 winding up petitions have been filed. If this rate continues, 2023 would be a record year.

Of the petitions issued in 2023, around half have resulted in the company being shut down. What this means is, the company will have gone into Compulsory Liquidation. There are an awful lot of Compulsory Liquidations where there is simply no return at all to creditors.

Are the energy suppliers getting paid?

That’s a difficult question to answer! In theory, if the company is being shut down and forced to sell its assets, there could be some funds there to repay the creditors. But let’s be logical about this. If a company has been unable to pay its utility bills for several months, there’s quite likely other suppliers with debts mounting up. Who’s to say there’s enough assets left to realise anything to repay these debts? Not forgetting of course, the costs of the liquidation which will be paid first.

The other side of the coin is that issuing a winding up petition costs money… £2,600 per petition! That’s before you factor in the costs involved with drafting and issuing the petition. The energy suppliers could easily be spending £5k to close down companies without any guarantee of actually getting back what the customer owes.

The phrase “throwing good money after bad” springs to mind.

There’s a vicious cycle in play

The utility costs for some companies have doubled over the last 12 months. The FSB has highlighted that more than 90,000 small businesses signed up to fixed deals in the second half of last year when rates were at their peak.

Company directors have even taken out finance to pay bills which are continually on the rise. They are stuck ‘robbing Peter to pay Paul’ to try and keep creditors at bay but the fact remains – costs have escalated beyond being affordable and simply forcing a customer to pay back the debt (especially when utility supplier operating profits are in the billions) doesn’t resolve the source of the problem. A number of businesses are now unviable due to the rise in utility costs almost alone.

How we think the problem could be resolved

We’ll admit that we don’t know the exact processes the energy suppliers have already taken to recover what’s outstanding. We like to think that they will have made several attempts to talk with their customer to come to some sort of repayment agreement and waived any late penalties or interest.

In this economic climate, there isn’t going to be any quick fix. The customers in arrears are not going to get a boost in trading from hanging on in there a little longer. They aren’t suddenly going to have the ability to pay off what they owe and keep on track.

What the energy suppliers need to do is have realistic conversations with their customers about what they actually can afford to repay. Come to an agreement and allow that customer to repay as much as they can and write off the rest. Allow their customers to get back on track – they are still paying far more than they should be for their utilities.

Forcing a company to pay inflated utility costs seems short sighted. It is simply unsustainable.

Is there a moratorium on the way?

There are calls from the FSB as well as Harcus Parker for a moratorium to be imposed if winding up petitions continue to be issued at the current rate.

We saw a moratorium in place during the covid pandemic which prevented landlords taking legal action to evict tenants who were in arrears as a result.

If your company is financially struggling, don’t leave it too late to ask for help.

If you receive a winding up petition, it’s very difficult to come back from. You need to try to resolve things with your creditors before it reaches that point.

By speaking to an insolvency practitioner, we can help you to have those difficult conversations and try and find a resolution.

Call us today on 0808 196 8676 or email help@trusolv.co.uk.