Caveats: Be Prepared

Whilst many businesses are great at looking to the future, many don’t take steps to protect what they already have.  The UK economy is in a difficult period at the moment and the high-profile example last week of The Body Shop falling into administration shows that tough times can impact any business.

It’s therefore more important than ever to ensure that pre-emptive steps are taken to protect a business. One of the most important steps a family business can take is to lodge Caveats with the Court of Session and local Sheriff Court.

It sounds draconian but certain Court orders, which could cause significant disruption to your family business, can be granted without you having any advance warning.  This can include orders freezing funds in your bank accounts and orders for advertising the potential liquidation of your company.  The risk of these types of orders being sought is a concern for all businesses, particularly so where there are payment disputes or where cash flow is a concern.

A Caveat helps to protect against this.  If someone tries to obtain certain types of Court orders against you, the Court needs to contact the Solicitor named on the Caveat and allow them to address the Court as to why those orders ought not to be granted.  It also gives you some time to prepare for any damaging consequences of such orders.  Without a Caveat, the order could be in place before you had the chance to do anything about it.

Caveats need to be carefully worded to make sure they protect the correct company and for the appropriate orders.  Separate Caveats are needed for each Sheriff Court where any action could be raised.  The rules on jurisdiction are complex so specialist advice from a Solicitor should always be obtained.  They only last for 1 year from when they are lodged so need to be reviewed and renewed annually.

Many businesses are reluctant to incur legal expenditures when they don’t need to.  However, if you’re not prepared then it may cost you much more in the long term.

If you would like to find out more about Caveats please contact Laura Brennan.