Protect your business with a caveat

Published: March 31, 2020

These are challenging times and the raft of support measures introduced by the government are very welcome.  There are other measures that can help protect your business.  Caveats act as an early-warning system in the event that certain types of action are raised at Court in Scotland against your business without your knowledge.  They should therefore be considered as an integral tool of any business risk management strategy.

Types of action covered by the Caveat early-warning system include:-

  • Company winding up petitions by creditors (or others)
  • Interim interdict (injunction)
  • Interim specific implement orders

The threats of winding up petitions will no doubt come thick and fast from certain creditors and debt collection agencies due to the current COVID-19 crisis and accompanying cash crunch. Early warning through a Caveat would be useful should any creditor make good on such a threat.

Interim orders can be used to stop an infringement of, or to enforce, legal rights in a variety of circumstances.  For example a breach of restrictive covenants, property access disputes or intellectual property rights disputes.

Without a Caveat, the application for an order against you may be granted without any prior notice.  Your first knowledge of this could be when sheriff officers arrive serving notice preventing you from going about your business or there is an advertisement in the local press stating a liquidator is to be appointed. The negative impact to your business can be immediate and catastrophic even when the basis for the order is ill-founded.

With a Caveat in place, the court will contact your solicitor immediately (even outwith working hours) to advise that an action has been raised and a party is attempting to obtain an immediate order. A Caveat means the court will not grant an immediate order but instead arrange a hearing, usually within 24-48 hours.

This advance notice allows you the opportunity to discuss the action with your solicitor, give instructions to oppose it, and enter into negotiations.

Caveats remain in place for one year and can be renewed annually.  Many of our business clients have Caveats in place and they are renewed every year as a sensible, cost-effective business risk management tool.