Yesterday’s news that Birmingham Council had issued a “section 114 notice”, or in plain English had become all but insolvent – or indeed “effectively bankrupt” – as a result of historical liabilities, will no doubt be of interest to council taxpayers and those who work in the city or drive in and out of it. 
Those who have direct financial dealings with a troubled corporate entity, or who work for it, will at least be initially relieved if there was no danger of its liquidation, and if it will continue to exist in its present form, come what may. This still leaves three key points of interest that will be of broad relevance to anyone financially exposed to a body with what may be accurately or euphemistically be described as cashflow issues
Payment Terms: any troubled service user may want its credit period extended. It could seek express agreement, or simply state its intention to pay later, or just say nothing and hope its suppliers would live with this. The suppliers would need to weigh up the risk of losing business as a result of objecting, if such business was worth keeping. The late payment legislation, and indeed the courts, would be available to suppliers who had effectively objected. Leaving aside CCJ stigma for a debtor, its suppliers may be well advised that if there is a danger of Peter being robbed to pay Paul, it is always better to be Paul. 
Contract cancellation: a deemed non-essential service provider might unexpectedly find one day that its financially stricken customer had cancelled a contract on short notice, or indeed no notice. Has a fixed term been ignored? Is there scope to mitigate the loss, or is it impossible to redeploy the time and resources? Might there be a chance to agree a suspension of services instead? If all else fails, is it worthwhile to sue? 
Employment contracts: reducing the wages bill, or indeed the headcount, is almost certain to come into the reckoning in the face of a debt calamity. Is the lesser evil half a job rather than none at all? If voluntary redundancy programmes switch to compulsory, are you confident that you will be properly represented via collective consultation? Or that any selection process affecting you will be fair and reasonable? There ought not to be mistakes where the cash strapped employer still has a dedicated HR function, but no one is infallible. And what about Settlement Agreements – can you be sure that there are no traps or loopholes? 
Do you deal with, or are you employed by, “effectively bankrupt” Birmingham Council? Does this unwelcome news mean that you may need legal advice? Feel free to get in touch. Contact David Cooper on 0121 325 5402 or via . 
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