Liquidation help

[skippy]

Hi

Over 12 months ago the Limited Company I was a director off was placed into voluntary liquidation. We did this after taking advice from several people and used a large insolvency practitioner that was recommended to us.

At the time of the liquidation the IP was really friendly with us, said it was all straight forward (we were only a small company with 5 years trading, running at about £250k per year turnover) and the whole process was over in a couple of weeks.

When the company went into liquidation myself and a fellow director had an outstanding director loan account - this had been created on the advice of our accountants. At the time of the final creditor meeting the value of the total loan account was approx £25k. However, we explained to the IP that neither of us had been paid in months from the company and we also had large expense bills (for purchasing kit for customers etc.) that the company couldn't repay. The IP said this could be offset against the loan and brought the amount down to £9k.

Six months on from the final creditor meeting we both got a couple of letters from the IP threatening legal action as we hadn't provided information required such as accounts, copy invoices and bank statements. Some of this the IP already had, and some we hadn't been asked for. We told them we could drop everything off with them and they said they had limited space and "we should keep it in a garage or cupboard for the time being".

The first anniversary of the liquidation is now upon us and again myself and my fellow director have received similar letters to last time, stating we have not provided information requested, but this time also saying we have not provided a proposal for paying off the £9k director loan.

We immediately contacted the IP and went over the entire conversation we had six months ago and they have said they are more interested in our proposal for paying the director loans than actually getting the additional accounts information they wanted. They have also sent out a report showing they have run up nearly £10k in expenses since this process started.

I am hoping someone in this forum can give me some advice. Firstly on the director loans - neither of us are in a position to pay this back in full. Is it likely our IP would accept a compromise proposal and is their any general rule should follow? Secondly, does £10k in addition to the actual £3.5k fee for the liquidation, sound right for the size of company we ran? Finally, what kind of legal hold does the IP have over us when making demands? We have no problem providing information to them etc, but if we make a proposal for the director loan accounts and they don't accept it, what course of legal action can they actually take?

I hope I have posted this in the right forum and put enough information in for people to help.

Many Thanks!

[Zeno]

I have no doubt at all that the IPs if asked to justify their fees, will be able to produce all the required schedules for the IPA that will show you have in fact, been undercharged (They always can).

You should have been informed of this increase during the process though but I am unsure as to the extent of which you have co-operated with them. You do seem to have made every effort to give them all the pertinant data.

How exactly did you run up the overdrawn DLAs? It is not advice I would give especially when you cannot pay it off within the usual 9 months. Do you have this in writing anywhere?

[Dave Shaw]

From your post it sounds like you have admitted liability to the £9k, if not then you may wish to consider disputing it and providing an explanation as to why the debt is not payable.

Assuming it is a real debt then the IP is likely to consider a commercial proposal for its repayment. If you can't afford it and you have few assets then provide this to the IP and propose something realistic in terms of a full and final settlement. An IP is likely to take x% now than have to pursue you through the courts.

Also if the liquidator wants to take this further they will have to consider how the action will be funded - if they go down a bankruptcy route this will cost money that (I assume) the liquidators don't have - they will require a creditor or third party to fund it (unlikely) or obtain insurance (unlikely too). If you dispute it then it will cost them even more as they will have to get judgement first. If they do have funds then they will have to get creditor approval to spend the creditor's money on pursuing you.

Fee wise the level doesn't surprise me but it does depend on how much work has been involved and should reflect the value added.

Finally the liquidator is responsible for the company's records - deliver them to them and get a signed acknowledgement of receipt.

David Shaw
totalitysolutions.com

[yorkshirejames]

This is exactly the sort of thing that happens to directors who believe they should put all their trust in their IP, without having anyone to look after _their_ interests.

Let this be a warning to all other directors reading this that you really do need someone to advise you (without being the actual IP). This is a service that my company can provide.

Skippy - my company would be happy to represent your interests in dealing with this IP, though we would need to see copies of letters etc first. To be honest, had we been engaged from the start, we would have come up with a rationale to assert that none of the £25k is repayable.

I wonder whether you have a claim against the accountant who advised this (again we can take a look)?

[skippy]

Hi All

Thanks for your comments and advice.

We have accepted liability of the £9k as it was in the final report produced by the IP.

This has moved on further as the IP as written to us suggesting that we now owe around £60k - based on payments made within the year the business was liquidated.

They appear absolutely focused on getting anything out of us that they can. I think its probably time to get legal advice :(

[Zeno]

They appear absolutely focused on getting anything out of us that they can. I think its probably time to get legal advice :(

Basically, that is the IP's job. They were engaged on behalf on the company, not you which as James has pointed out is where the trouble lies.

[Spongebob]

Let this sorry story be a warning to any others considering appointing a firm of insolvency practitioners to handle the liquidation of their company.

Despite being appointed by the directors, and despite in many cases having their fees paid by the directors, an insolvency practitioner is not working on behalf of the directors.

He is working nominally on behalf of the company, and more cynically on behalf of himself. He is out to mine as much cash as he can out of the company, supposedly in the interests of the creditors. It is mysterious however, how the level of his fees will inevitably rise to meet the level of the monies recovered!

Yet in very many cases - particularly with small companies - the appointment of an insolvency practitioner is completely unnecessary. There is a perfectly good framework in place that allows a small company owner to engineer the liquidation of their company at no cost whatsoever, using the services of the Official Receiver.

I have explained this method in full many times on these forums. Search though my previous posts. I am also happy to answer PMs on the subject. I am currently getting 2 or 3 per day from people desperate for good practical advice on insolvency. Please note that I have no formal qualificatons in this area; I am simply a business owner who has been through the system a few times and has learned how it works.

Unfotunately, as Skippy will tell you, an insolvency practitioner can often be the very worst place to go for advice...

Cheers
Bob

[yorkshirejames]

Hi All

Thanks for your comments and advice.

We have accepted liability of the £9k as it was in the final report produced by the IP.

This has moved on further as the IP as written to us suggesting that we now owe around £60k - based on payments made within the year the business was liquidated.

They appear absolutely focused on getting anything out of us that they can. I think its probably time to get legal advice :(

With respect, I responded to your post two weeks ago, and I think I sent you a PM with my contact details. I would have been (and still am) happy to have an informal chat on the phone with you, to see whether my company can assist formally. I didn't hear back from you.

Please appreciate that any further advice given to you (by myself or others) will be dependant upon a detailed look through letters/records/contracts, which I am sure you wouldn't want to post-up in an open forum, and would prefer to show to an advisor in the privacy of a meeting room.

On the face of it, this IP may well have a legitimate claim for the £60k (and you'll be surprised how much of it goes to cover fees, rather than going to the creditors) but it is highly possible that we (or other advisors) can find a way out of this for you.

Don't make the mistake of going to a small town generalist solicitor though.

[toddle2u]

There is a perfectly good framework in place that allows a small company owner to engineer the liquidation of their company at no cost whatsoever, using the services of the Official Receiver.


If there was even a sniff of £60k in fees the OR would go after the OP as well. It wouldn't just be an IP

[Spongebob]

If there was even a sniff of £60k in fees the OR would go after the OP as well. It wouldn't just be an IP

A good accountant - i.e. one with the expertise to be totally convincing in their slightly flexible interpretation of strict accountancy law - would doubtless be able to 'spin' the figures in such a way as to satisfy the junior member of staff at the OR office given responsibility for handling the case.

Only in obvious instances of fraudulent activity by the directors would the case be referred to a more senior officer for further investigation. Such is the level of their current workload that the pressure is on to sign off cases as soon as possible. Make this easy for them and all should be fine. They are civil servants, after all - box tickers and ar$e coverers!

A private sector IP meanwhile, will be totally focussed on earning as much money out of the wreck of your business as he can. If this means sacrificing the directors to the bankruptcy courts in order to earn a few more quid, he will do it in a heartbeat...

[Alys]

Hi,
Just looking for some advice. My husbands small ltd company went into liquidation a month ago on the advice of his accountant. The company was being closed in a month anyway due to termination of contract but as my husband was having to subsidise the business through our own private funds it was thought best to fold early.

Just wondering what personal claims can be made against us. The staff are making claims as contract was cut short and there was no notice, but there is not enough money in the company to pay to appoint recievers, or to pay them from the company. Can they make personal claim against us? Also, some minor bills were left unpaid, I don't understand the legalities of any of this, please help!

[JEREMY HAWKE]

Hi,
Just looking for some advice. My husbands small ltd company went into liquidation a month ago on the advice of his accountant. The company was being closed in a month anyway due to termination of contract but as my husband was having to subsidise the business through our own private funds it was thought best to fold early.

Just wondering what personal claims can be made against us. The staff are making claims as contract was cut short and there was no notice, but there is not enough money in the company to pay to appoint recievers, or to pay them from the company. Can they make personal claim against us? Also, some minor bills were left unpaid, I don't understand the legalities of any of this, please help!

Not if you did not make any written personal garentees .Please remember the obvious thing that you have over looked here .Employees sub contractors and small suppliers very often dont understand the law .They have no idea how limited liabilty works and do not grasp the concept that your company is a seperate organisation and nothing to do personally with you .
We have seen many courier companies go to the wall in this historic year :D

I have lost count of the number of owner drivers that have declared that they are going to sue the directors only to be laughed out of the office by their own solicitors !!!!!

[Spongebob]

Hi,
Just looking for some advice. My husbands small ltd company went into liquidation a month ago on the advice of his accountant. The company was being closed in a month anyway due to termination of contract but as my husband was having to subsidise the business through our own private funds it was thought best to fold early.

Just wondering what personal claims can be made against us. The staff are making claims as contract was cut short and there was no notice, but there is not enough money in the company to pay to appoint recievers, or to pay them from the company. Can they make personal claim against us? Also, some minor bills were left unpaid, I don't understand the legalities of any of this, please help!

There is a slight contradictiction here. You say that the company has gone into liquidation, yet you go on to say that there is not enough money to appoint a receiver.

A company only goes into liquidation after a receiver has been appointed. A little clarificaton is needed. I suspect that what you mean is that the company has ceased trading.

Whatever, Jeremy Hawke is quite correct. The company is an entirely seperate legal entity from your husband or yourself. Only the company can be sued - you are quite safe.

You miht be in for a somewhat uncomfortable few months as creditors and ex-employees vent their spleen at you. However, there is nothing legally that they can do to get any money out of you. It is the company that owes them, and the company no longer exists in any meaningful way.

Eventually the company will be wound up by HMRC if they are a creditor. If they are not, you can apply to Companies House to have the company struck off.

[bbbbb]

. If they are not, you can apply to Companies House to have the company struck off.

And would you recommend that they notify the required parties i.e.



members, usually the shareholders;
creditors, including all contingent (existing) and prospective (likely) creditors such as banks, suppliers, former employees if the company owes them money, landlords, tenants (for example, where a bond is refundable), guarantors and personal injury claimants. Also, you must notify appropriate offices of Her Majesty’s Revenue and Customs (HMRC) and Department of Work and Pensions (DWP) if there are outstanding, contingent or prospective liabilities;
employees;
managers or trustees of any employee pension fund; and
any directors who have not signed the form

when they apply for the company to be struck off?

[Spongebob]

And would you recommend that they notify the required parties i.e.



members, usually the shareholders;
creditors, including all contingent (existing) and prospective (likely) creditors such as banks, suppliers, former employees if the company owes them money, landlords, tenants (for example, where a bond is refundable), guarantors and personal injury claimants. Also, you must notify appropriate offices of Her Majesty’s Revenue and Customs (HMRC) and Department of Work and Pensions (DWP) if there are outstanding, contingent or prospective liabilities;
employees;
managers or trustees of any employee pension fund; and
any directors who have not signed the form

when they apply for the company to be struck off?

I would recommend that they notify all the above when the company ceases trading. The above should also be notified that the company has no assets and no funds to appoint a liquidator. Creditors should also be invited to initiate winding up proceedings. This fulfils the directors' responsibilities in full.

Of course, the only creditor that is likely to initiate winding up proceedings is HMRC. If they are not owed any money, then it is likely that absolutely nothing will happen. Other creditors are unlikely in these circumstances to spend money chasing debts which they know they can never recover.

In the absence of a winding up petition from HMRC the next step is to apply to Companies House for strike-off. There would be nothing to be gained from any creditor objecting to this.

[bbbbb]

I would recommend that they notify all the above when the company ceases trading................ This fulfils the directors' responsibilities in full.

Do you not think that they should also advise them when the directors seek to have the company struck from the register ?

[David Griffiths]

Do you not think that they should also advise them when the directors seek to have the company struck from the register ?

It's a legal requirement to send a copy of the striking off form DS01 to "all notifiable parties" - creditors, employees, shareholders, directors, pension trustees within seven days.

Notifying them when the company ceases trading is not compulsory, but it makes sense to do so.

[scooter]

the only way the employees will get paid is when the company actually goes into liquidation. the they can claim from the goverment there pay and anything else which is owed ie holidays but only up to a maximum of £330 per week

[Spongebob]

the only way the employees will get paid is when the company actually goes into liquidation. the they can claim from the goverment there pay and anything else which is owed ie holidays but only up to a maximum of £330 per week

I think you will find that the only thing that the government will pay is their statutary redundancy entitlement.

[toddle2u]

I think you will find that the only thing that the government will pay is their statutary redundancy entitlement.

No they will pay unpaid wages and holiday pay as well. I think the maximum has just been increased to £350 pw for redundancy

[Dave Shaw]

Employees can claim up to £380 per week from the National Insurance fund for:

Redundancy
Arrears of pay
Holiday pay
Pay in Lieu of Notice
Protected Awards
A few other things that usually are not relevant

Some of these are subject to reduction for tax, NI and alternative income.

See financialcrisis.co.uk

These can be claimed if the company is in liquidation or through a tribunal process where the employer fails to pay any award made.

David Shaw
totalitysolutions.com