IT supplier? Got a customer who won't pay? Dob them in to the Insolvency Service

From today IT suppliers are encouraged to begin shopping their failing customers into the Insolvency Service, under a new order coming into force that will guarantee payment to providers of companies entering administration. Under Insolvency (Protection of Essential Supplies) Order 2015, the rules have been expanded - …

[Graham Marsden]

"they will also be guaranteed payment from the insolvency practitioner"

Which, after the Administrators have taken their huge cut, will probably be pennies on the pound...

[Magnus_Pym]

Re: "they will also be guaranteed payment from the insolvency practitioner"

I think you have misread it. You would get pennies in the pound for any invoices up to the point the shark/insolvency practitioner steps in but full payment after that. Why would it be a benefit otherwise?

[Anonymous Coward]

Re: "they will also be guaranteed payment from the insolvency practitioner"

> Why would it be a benefit otherwise?

Who said it was a benefit to anyone except the company in administration?

It's an imposition. The supplier loses their choice of who to do business with and on what terms.

When it's something basic like gas or electricity then there's no problem. The suppliers will sell at their inflated "standard tariffs", so they can even turn a nice profit from the customer's unfortunate situation.

I guess for an equipment vendor, which maintains an official inflated list price which nobody normally pays, the same could apply.

But for an IT service provider which negotiates separate contracts for each customer and each project, rather than having a published book price, this sounds like a nightmare.

[Anonymous Coward]

About time, especially for suppliers to the KBB industry.

[Christoph]

"The order defines IT supplies as ... computer ... software, ... IT technical assistance "

This law was originally aimed at huge companies supplying standardised services to vast numbers of customers. Are we likely to see things like:

"Hi. Your one-man firm that once supplied some bespoke software and some technical assistance to this company at a special introductory price (in the hope of more business) is now required to provide any further services they need, at the same price and regardless of your commitments to other customers."

[Anonymous Coward]

Babcock

We have enough trouble with 'solvent' customers. Just had to take a large defence prime to Court as they just couldnt be bothered to pay after months and months.

And as a punishment beating to teach us a lesson, we got dumped from doing any more supplying.

Its not just customers in administration that are a pain...

[dcluley]

Re: Babcock

"And as a punishment beating to teach us a lesson, we got dumped from doing any more supplying."

Did you really want to continue supplying a company that doesn't pay?

[Anonymous Coward]

Re: Babcock

Thats not the point - no supplier should be 'punished' for legally pursuing payment when all other avenues have been exhausted.

And they snapped to attention when the summons turned up.

[Martin Summers]

Re: Babcock

It kind of is the point. You are no better off either way. You continue your relationship with them and they do the same thing again. Eventually they might just run out of suppliers and get the message. You stood up to them and that was the right thing to do along with walking away.

[Steve 114]

Extended ripoff

So a client who has entered a 'prepack Administration' specifically to avoid paying outstanding debts has the right to insist we go back to work there?

[Anonymous Coward]

Re: Extended ripoff

I don#t think you're forced to unless you use the insolvency process.

I'm unclear (thanks, Reg) why anybody would invoke this process. If the bills prior to insolvency process remain at risk, far better to walk away. And refuse to do anything for the administrators unless they pay an amount ex gratia that just happens to clear the outstanding bills.

[Essuu]

Read all about it !

Strange of El Reg not to link to the gory details - here they are - http://www.legislation.gov.uk/ukdsi/2015/9780111128992

My reading, and I am not a lawyer, is that non-payment clauses still have effect so you can terminate them for not paying. You just can't terminate the contract just because they've gone into administration.

[oldhand]

Broadband

I would like to see the provision of communication down telephone wires treated as PROVISION OF ESSENTIAL SUPPLIES, so that we were not isolated when the DSL or ADSL connection was lost. BT is very casual when that happens and non-BT customers are helpless. Most firms simply cannot operate without a broadband connection; it is now essential.

[Anonymous Coward]

The BOFH/Friday angle to all this

Provision of hardware/software will be covered by this.

If you work at a firm about to go down the tubes but in administration, then I infer from this that the supplier can now be confident of 100% payment (please correct me if I am wrong) so if in the dying days they receive an order for lots of stuff (perhaps of the "portable" kind), they would fulfil the order, invoice to follow at the end of the month as usual.

If, separately, it is not properly inventoried in the chaos of administration, or becomes rapidly "used" so that it cannot be returned and has to be sold in the firesale at a knockdown price, then there would seem to be opportunities for an enterprising BOFH to cushion the blow of administration or spread some largesse to unfortunate colleagues.

I'm sure there are flaws in this, but it's one of those "interesting discussion" conversations in the same way as theoretical planning for world domination is NOT intent to commit any offence

[Ken Moorhouse]

Money owed before administration...

My reading of this is that money owed before administration is not covered by this legislation. It only covers invoices raised after administration, and it looks as if you need to get that explicitly guaranteed by the administrator.

Anyone who has ongoing contracts (e.g., annual retainer type service charges, rather than ad hoc) needs to look at their T's & C's where I suspect this would invalidate some of the clauses.

[Ken Moorhouse]

Further ramifications

Thinking further about this. It can sometimes be years before activity on a company in administration ceases. For example for years after the initial event HMRC might want to consult accounting records that are in backups that, practically speaking, only the IT company that supported them can easily resurrect. That is a very onerous obligation, particularly where the software used by the company at time of insolvency cannot read old backups, and old backups cannot be read because the software that created them cannot be reinstalled in order to view them.

Looks like there is a market for IT consultants to advertise such services to insolvency practitioners. Hmmm...