What every lender, conditional seller or debt collector knows is that there are almost no lengths to which some people will go in order to avoid paying their debts. Questionable leases and suspect changes in ownership are just some of the tactics employed by serial debtors; and while all of these strategies can be combatted in court, wading through the mire of tricks can be time-consuming and expensive. And, of course, any extra cost has the potential to reduce the net value of the recovery.
However, in the case of business debts, there is one avoidance tactic that, despite being commonly used, provides no protection: hiding behind a trading name.
In some circumstances a trading name can act as a barrier between the creditor and the debtor. Think about walking into a shop and buying something, the contract of sale is between you and the owner of the shop, even though the shop may be owned by a company or individual whose name is not displayed above the door. Think of almost any restaurant or bar: it’ll be owned by a company or individual, although it will usually trade under a different name.
In Scotland, a person carrying on a business under a trading or descriptive name can be sued as that trading or descriptive name. There is no need to identify the individual or company that operates behind the name. What’s more, that a court order granted against a trading name can be enforced against the operating individual or company.
While operators and owners may go to great lengths to disguise or conceal the full extent of their control of a business, they cannot hide behind the trading name in an attempt to misdirect or deter creditors. The trading name will (in most cases) be the most readily identifiable piece of information; it’ll be the name above the door, the sign in the window or the name on the invoice.
So, if a business owes you money, and (for whatever reason) you can’t identify the owner, suing the trading name is the answer.
For more information, please contact Danny McClymont or your usual Brodies contact
On October 3, 2018