Three tips to get paid in 2022 – Corporate/Commercial Law

2022 is upon us and COVID-19 is still dominating our businesses
and lives.

With many businesses struggling, cash flow is vital to keeping a
business healthy. You need to set yourself up now to put yourself
in the best position possible to recover debts and keep your
business with a steady cash flow.

This article looks at three strategies to put you in the best
position to protect your business.

1. 
   

   Review your contracts

   
   

   1. 
      Have you registered all security interests granted under the
      contract?
      
      Be aware of the Personal Properties Securities
      Act – seek legal advice as to whether you are able to
      register your interest on the Personal Properties Securities
      Register (“PPSR”) and ensure it is done correctly and as
      soon as possible.
      
      If your customer enters into liquidation and your registration
      on the PPSR is valid, you may become a secured creditor and be paid
      ahead of unsecured creditors.
      

      Tip – Ensure that your PPSR interest is registered over
      the correct entity – a common and costly mistake is to register
      under the wrong entity:

      
      

      • If you are dealing with a trust with a corporate trustee – to
        be safe register under the ACN of the trustee
        company and the ABN of the trust.

      
      

      • If you are dealing with only a company (which is not a trustee
        of a trust) you should register the company’s ACN.

   
   

   2. 
      Ensure that COVID-19 is factored into the contract
      
      Ensure that it is clear what is to happen if there is a delay or
      cancellation due to COVID-19 factors – you should consider factors
      such as shipping delays, employee shortages and government
      restrictions.
      
      If there is a force majeure clause, be specific as to how and
      when it applies in relation to COVID-19.




2. 
   

   Take personal guarantees where possible

   
   
   Ask for a personal guarantee from the director (if you are
   dealing with a corporate entity) and perform a property search to
   see if the director owns any property in their personal name. This
   allows you to seek payment from the director personally if an
   administrator or liquidator is appointed to the corporate
   entity.




3. 
   

   Review and update your terms and conditions

   
   

   1. 
      What are your trading terms?
      

      • Start enforcing your trading terms.

      
      

      • Consider providing less (or no) credit to high risk
        customers.

   
   

   2. 
      Check for default interest.
      

      • Is there interest payable upon default and if so, what is the
        interest rate applicable? If you do not set this out in your
        T&C’s you may not be able to charge interest on overdue
        invoices.

   
   

   3. 
      Update T&C’s to include clauses to allow you to take
      security and personal guarantees.

   
   

   4. 
      Ensure that your T&C’s cover COVID-19 related
      issues.
      

      • You should be specific in your terms & conditions /
        contracts that you cover delays / cancellations due to
        COVID-19.




4. 
   

   Lessons

   
   
   A little cost upfront to obtain good advice regarding the best
   strategies to get paid will put you in the best position to be paid
   in 2022.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances. Madgwicks is a member
of Meritas, one of the world’s largest law firm
alliances.