Race to reclaim costs before client goes bust

My construction company began renovating a large site for a high street retail chain about 12 months ago. However, due to market conditions, the chain is on the verge of going into administration. This project has proved very expensive for us and the client has paid very little of what is owed to us. I am therefore concerned that we could end up on a long list of creditors if the company goes into administration.

Can I insist that we are now paid immediately - considering that the client has already pushed payments back beyond the date originally stated in the contract?

Your first point of reference must be the contract. It is important to check whether it contains any provisions that may be of assistance - such as an escrow account intended to release sums due to the renovation contractor.

Retention of title clauses, if included in the contract, can also assist in reserving rights of ownership over materials used in the construction process. By reclaiming materials, it is possible to take steps to minimise your losses. Retention of title provisions are, however, generally ineffective once the materials have been incorporated into the building.

If your client has yet to enter into administration, you could consider commencing adjudication procedures - whereby an impartial third party adjudicator resolves a dispute between two parties. These procedures should be set out in the contract and can provide a cost effective and speedy resolution. A favourable decision will secure payment - and mean you avoid having to join the queue of unsecured creditors.

If your client does enter administration, it will not be possible to commence adjudication procedure without seeking permission of the court. A practical step to take would be to ensure that all plant equipment and materials are physically secured to ensure that they are not seized by the administrator.

But bear in mind that a client's insolvency does not necessarily mean a project will end and a contract be terminated. There may be scope for the project to continue if the contract is taken on by a new party with an interest in completing the project.

David Few is head of corporate and commercial at Blandy & Blandy, a law firm

Trade marks don't travel

My marketing consultancy has registered a number of trademarks with the UK Intellectual Property Office (IPO) and they have been accepted. But I have now been informed that I should also check and register them with the European Patent Office (EPO). I had assumed that, because my trademarks were successful at the IPO, they must be fine at the EPO. Am I wrong to assume this?

Unfortunately, you are wrong. Trade marks are territorial rights and valid only in the jurisdiction in which they are registered.

Trade marks registered at the IPO give the holder the right to prevent third parties from registering and using identical or similar marks in relation to identical or similar goods in the UK. A UK trade mark registration does not give its holder any rights outside the UK.

Nor can the EPO protect trademarks. It plays no role in this - it simply grants patents within Europe.

Pan-European trade mark protection is available through the Office for Harmonisation of the Internal Market (OHIM) and it seems likely this is the organisation your adviser had in mind.

An application to register a trade mark at OHIM is completely separate from an application to the UK IPO but, if the application achieves registration, it protects the mark in all 27 of the EU member states, including the UK.

However, the acceptance of a mark at the UK IPO does not guarantee its acceptance at OHIM, as the rights of trade mark owners in the other 26 EU states have to be considered. If you intend to trade under your marks outside the UK, it would be sensible to seek additional protection whether in the EU or elsewhere. But there is no obligation to register the marks anywhere else if they will only be used domestically.

Elizabeth Dunn is a trademark assistant at Dehns, patent and trade mark attorneys

Lawsuit threat adds salt to wound

I am the managing director of a medium-sized machine products distributor. We have been badly affected by the downturn and are going into insolvency. But on top of the stress of insolvency, I am worried that I will also be facing a lawsuit, as one of our shareholders is arguing that we should have realised we would go into liquidation and have stopped trading earlier.

Although I was aware there were cash flow problems a couple of years ago, I took active steps to secure investment and manage the debt. Does this make me personally liable?

When there are doubts about a company's solvency, the directors' duty is to manage the business in a manner that protects the interests of the creditors as a whole. Directors should be aware that they can be personally liable if they continue to trade when there is no reasonable prospect of saving the business. They can also be banned from being directors.

However, this does not mean they should resign or stop trading at the first sign of problems. A recent case involving Langreen Limited provides some comfort, as it showed that a court will not impose sanctions if directors can prove they made honest and rational commercial decisions to protect the interests of creditors (even if they turned out to be wrong).

To have the best chance of proving this, directors should hold regular minuted meetings, formulate specific areas of responsibility and take professional advice. Your "active steps" to secure investment and manage the debt could help protect your position.

Paul Taylor is a corporate partner at Fox Williams, a law firm

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