Vital advice to hundreds of SMEs caught up in the British Steel insolvency crisis.
The estimated 350 businesses associated with British Steel’s supply chain, many of them being regional SMEs, must act now to limit the impact of the company’s insolvency upon them.
An insolvency expert urged firms, which have contracts with the former steel giant in Scunthorpe, to seek advice to mitigate the likely effect. This advice was supported by his colleague – an employment law specialist – who advised affected firms to ensure they took the correct steps if looking to restructure.
Regional Specialist Insolvency practitioner Ian Rose explained how a suppliers’ major concerns, aside from the wider fears over the future of their employees and those at British Steel, would include being paid for historical invoices and any on-going works they had been contracted to undertake.
It was vital, explained Ian, that contracts were examined carefully in respect of a firm’s ability to claim title to goods supplied and any which they still had in their possession.
“It is extremely important to query to what extent they are contractually entitled to claim title on any goods held as part of that on going work,” said Ian, who is a director with Wilkin Chapman Business Solutions – the corporate insolvency arm of the region’s largest law firm, Wilkin Chapman solicitors.
There would also be concern over goods and/or stock recently sold and delivered as part of any contract, said Ian. The main concern here was whether the supplier had an effective “Retention of Title clause” that may allow it to ‘repossess’ those goods, he explained. However, he added, those with outstanding invoices without any effective remedy, whether under a “Retention of Title clause” or otherwise, would face the biggest challenge in getting paid.
“It is those that need to be assessing the impact of non payment on their businesses and what steps, if any, can be taken to mitigate the impact of British Steel’s insolvency with a view to protecting their core business,” said Ian.
Meanwhile Wilkin Chapman colleague Richard Parnell, a Partner within the Employment team was concerned about a lack of the correct procedure if firms were looking to reduce numbers of either employees or contractors.
“This news is likely to bring with it much change for businesses affected with restructuring possibly necessary. In taking any action, they must ensure they follow correct procedure to minimise the risk of claims being pursued against them,” said Richard.
They both added: “There is no doubt this news will shake the whole region, with so many thousands of people employed either at the works’ themselves or within the supply chain. For many, this is about what they can do now to ease their own situations, and that of their direct employees and we would also ask such business owners to seek prompt advice, giving everyone a clearer understanding.”