Fleet News

Large fleet customers and the problems with early in-life debt default.

Fleet news logo

By Edward Flanagan, Partner at Corclaim 

Against a very uncertain political and economic backdrop, many UK fleet providers are still open for business and indeed thriving.

However, how can a fleet provider prepare for the scenario where a new and initially valued customer of considerable size suddenly stops or delays payment?

The key issue here is to know your contractual position. Is this governed by way of Master agreement or do we have a succession of documents that need to be considered before arriving at any strategic decision?

Is your contract a Master hire agreement whereby title to the good will never pass? Is it a Master contract purchase agreement where title may eventually pass?

It is almost inevitable that a contract will incorporate such terms that cater for default and will allow a fleet company to terminate the agreement, recover the goods and any debt.

Equally where there is a matrix of different agreements, then if drafted correctly, such documents should contain a cross default clause that will allow the owner to terminate all agreements if one is breached.

Is termination what we want with a large and relatively new customer? The popular narrative at present is that many companies feel unsure about the economy moving forward.

The UK automotive industry, normally viewed by the rest of the world as a beacon of economic light, or at least an example to show how overseas investment can be garnered.

Who would have thought that within a few weeks Japan would conclude its trade agreement with the UK, leading to the ultimate closure of Honda at Swindon, the severed downturn at JLR and then the rationalisation of Nissan in Sunderland.

How does one risk manage the addition of sizeable new customers? Can we map out the associated risks to the customer and their industries?

Litigation should be a last resort but the need for it will accelerate if your customer is not managed. Look at consumer customers, they must be managed continually, with policies insisted upon by the Financial Conduct Authority.

Such policies are, treating customers fairly, affordability and credit worthiness together with default and arrears management.

We are not suggesting that you follow these to the letter with a commercial customer but if you replicate the spirit of proactivity this will enable you to enmesh yourself with your new customer.

Such close engagement will allow you sufficient visibility as to how you reach a resolution, either to stick with your customer and help deliver a turnaround or to cut quickly and harshly to ensure you recover your assets whilst they are still there, sell same, compute your losses and then litigate for any balances.

Do you have personal guarantees, cross company guarantees, debentures, charges etc. if you do not you may insist on same as part of your continuing forbearance?


Get your contracts right, ensure you know your rights in life, can your commercial client be rehabilitated? Are they willing to give you current and continuing management information?

Will they give you security or guarantees? If they will do all or some of these then a turnaround for the good of all can be achieved. If not then termination and litigation should be pursued with vigour.          

Leave a comment for your chance to win £20 of John Lewis vouchers.

Every issue of Fleet News the editor picks his favourite comment from the past two weeks – get involved for your chance to appear in print and win!

Login to comment


No comments have been made yet.

Compare costs of your company cars

Looking to acquire new vehicles? Check how much they'll cost to run with our Car Running Cost calculator.

What is your BIK car tax liability?

The Fleet News car tax calculator lets you work out tax costs for both employer and employee