Debt Collection: Effective Strategy to Recover Your Unpaid Invoices

Avoid further loss and stress, use these effective debt recovery strategies to get results.

Posted on

19 December 2017

| Last updated on 31 March 2019

Debts Collection: Effective Strategy to Recover Your Unpaid Invoices

To recover debts in the UAE effectively and efficiently, a company needs a process in place allowing; recovering of outstanding debts, ongoing evaluation on the likelihood of success and the ability to make a decision at any time to stop further costs being incurred if debt recoverability turns out to be highly doubtful.

Debt Recovery Strategy

A good debt recovery strategy in the UAE is divided into two stages:
1. Pre-litigation
2. Litigation

Stage 1: Pre-litigation

Carrying out the following steps in an organised and consistent manner can improve cashflow and help avoid resorting to costly litigation to recover debt.

Step 01 - Information gathering

Gather all relevant information relating to the debt, including copies of any agreements, orders, invoices, bills of lading/air waybills, delivery notes, copies of correspondence and the full contact details of the debtor.

Step 02 - Preliminary Assessment

If possible make enquiries, to assess the status of the debtor and if there are likely to be assets in the jurisdiction applicable to the recovery.

You may find debtors have ceased trading and/or left the UAE, and/or are already the subject of claims. This can impact the commercial viability of pursuing the debt, depending upon the amount in question.

Step 03 - Contact the Debtor

Contact the debtor via email or telephone, and meetings. If a response is received, at this point make a further assessment of the best course of action. This may include agreeing on a payment plan with the debtor.

Step 04 - Letter before Action/Proceedings

If no response is received or it is considered pointless to pursue further communication, you may send a letter before action (which may carry more weight if issued by your lawyer) to the debtor requesting debt settlement and reserving your right to take further action, including issuing proceedings against the debtor for the debt recovery.

Where the debtor has bounced cheques, you may also reserve your right to take action for the bounced cheques (this can be persuasive as in the United Arab Emirates dishonouring cheques is a criminal offence punishable by imprisonment).

It is also an option at this stage to serve a notarised letter of demand via a court notary. Whilst this is still a simple demand for payment, the formality may encourage a debtor to engage with you about payment.

Stage 2: Litigation

Should Stage 1 not result in payment, you may decide to proceed with taking court action for recovery of money from the debtor.

Step 01

Engage a local UAE advocate, as only local advocates may appear as counsel before a UAE court.
A Power of attorney must be put in place granting representation powers to the advocate, to be submitted to the court.

Step 02

Statements of claim are prepared.
Debtor memorandums will be submitted to the court.
The local advocate will attend hearings along with experts (if relevant).
An expert may be appointed by the court to examine the facts of the claim.

Step 03

Settlements may need to be negotiated and agreed with the debtor.
Attachment orders may need to be obtained over the debtor’s assets, together with other enforcement action.

With the above said, prevention is always better than the cure. This means examining your credit control procedures and ensuring your terms of business provide for effective enforcement of claims to encourage debtors to pay.

Banks Legal has a proven track record in obtaining results on debt recovery matters and can help you.