Been dropped in it....

[primus]

Hi all,

First post. Recieved this AM a letter stating that I owe a £45000.00 debt from a company I once helped start up. Was with the company for 8 months but not as a director. I signed, probably wrongly, an agreement with a factoring company and now that compant 8 years later has come to me for the money they owe. As I said, I wasn't a director or share holder. I was there to do sales and happened to be there at conception and set up. Personally I can't remember signing anything but they have my signature on the agreement. I belive this factoring agreement was signed by the 2 directors also who stayed with the company until the recent winding up.

As a none employee of over 8 years. No Directorship. And no connection or contact with the directors or company in the last 7 years. An no financial position within the company during my time with them, can they chase me for this money?

Timing couldn't be worse as my 4 year old son was diagnosed with Cancer
2 weeks ago.

Any help or advise would be really helpfull..


:)

[LASS]

Sorry about the kid, about the kid. But i'f you've signed something stating you take liability or whatever then you've signed it and your screwed.

[primus]

Thanks for the reply

Thats what I fear. Except I signed the factoring agreement as a director. I found out soon after that I was not going to be one. Basically, I was an employee. Why would they chase me for the debt if there are two active directors still at the company 8 years later. The company is still live. If I was an employee of any company and wrongly signed something or was ill advised, would this still be a binding even in these circumstances. Surley there is a safety net for these sets of circumstances. ie: If I worked for Tesco and signed a credit agreement on their behalf as manager would I then be chased for any debts/issues they had with this bank years after I left? surely not!?!

[LASS]

If you were no instated as a director and the contract HAS to be signed by a director then i guess you'd be fine and dandy

[primus]

I don't know if it had to signed by a Director or not. But even if I was the finance or accounts manager and acted on behalf of the company surely that would clear me of personal financial responsability? As an employee surely there are legal reasons why this can't debt can't be placed an ex-employee's way. Isn't that the very reason for Directorships....they carry that can limited by shares?????

[LASS]

Best bet is asking a lawyer buddy...
If you do have to pay i feel for ya man thats alot smackers!

[primus]

It's a lot of lolly to be landed with on a Saturday morning. Nearly ruined my cornflakes...

I really do think there is room to manover on this one. I can't believe that the buck can stop at an ex-emplyee when there are two active directors who ran up the debts over the last 7 years.

[maxine]

Hi Primus

Really sorry to hear about your son.

Have you seen a copy of the agreement that you signed? You need to get a copy of this pretty quickly to get some proper advice. Perhaps look locally for a solicitor who gives a free consultation session.

If you signed as a director then the factoring company should have conducted reasonable checks. It depends on what capactity to signed this in - was it in the ltd company name as vicarious liablity would indicate director or not you would have had authorisation to bind the company to that agreement.

My fear is that you may have signed a personal guarantee for the company debt which would mean that you are bound irrespective of your position in the company as the factoring company would have been looking to cover their risk from a credit worthy individual who they could recover the debt from if the company didnt pay.

Good luck and keep us updated :)

[primus]

Hi Maxine.

I think the first call is to get a copy. I will do this monday AM. If this was for and on behlaf of the company then I suppose they're barking up the wrong tree. Would a large bank RBS offering factoring for a Limited companies take signatures from non- directors? I wasn't even able to sign cheques! I suppose I'd better find out.

Reading the letter recieved again it state - "We refer to your written Guarantee and Indemnity. You will recall that you guaranteed the obligations and liabilities under the terms of an Invoice Discounting Agreement/Factoring Agreement between (company) and RBS"

I think I should worry!!!!!!!!

[maxine]

Oh dear.. it doesn't sound good. The Guarantee would refer to a personal guarantee and the Indemnity bit is usually to get out of contracts that would be seen as void or unenforceable (kind of).

Did RBS submit a proof of debt claim during the winding up process? Did you have any awareness of this debt before now through any other correspondence? Was there (possibly) a limit on the amount that you would guarantee?

What is the debt actually for? Is it for factoring fees? Wouldnt this have been deducted before the payments made from debtors?

[primus]

I hope

I have had no contact with the company since I left. I also signed an agreement to have no contact with the industry when I left - slightly paraniod company director. I had no awareness of the debt or warnings. I haven't heard from anyone in the campany or otherwise for 7 years or more. Im no longer in the same industry since I left.

No idea what the debt is for other than its from RBS for outstand £45000.00. You would think the fees etc. would be deducted during the factoring process.

Basically I had no idea the comapny was in trouble or winding up until today. How long can an agreement like this hold water?

What would you sugest as a course of action? I'll get a better idea of who what why on monday. Do you think a solicitor ASAP? Or just state my case and see what happens...

Thanks Maxine for the pointers so far!!!

[maxine]

Hiya

Unfortunately even though you may have signed a restrictrive trading agreement or whatever when you left the company this would have been between you and the company and the agreement with you and the bank/factor would have still been in place when you left unless you specifically terminated it. It will "hold water" until it is terminated by either party ie you and the bank and not the company. I think. But please go see a solicitor asap.

Wishing you luck :)

[itaufait]

Basically I had no idea the comapny was in trouble or winding up until today. How long can an agreement like this hold water?


There's a statute of limitation on debt under CCA but I don't think you'd be covered by that - I would presume the agreement is ongoing.


What would you sugest as a course of action? I'll get a better idea of who what why on monday. Do you think a solicitor ASAP? Or just state my case and see what happens...


Definitely contact a solicitor and don't communicate with the other party until then.

PS: Don't volunteer any information to the other party or even here (as you're communicating in public) about it until you've spoken to the solicitor.

[primus]

Thank you itaufait. Sound advise. Its a mine field. Im certain the agreement would be ongoing and I assume they've used factoring up until recently. I will need to obtain a copy of the agreement to find out the facts. Also an idea of what this debt entails.


Great Forum....

[maxine]

There's a statute of limitation on debt under CCA but I don't think you'd be covered by that - I would presume the agreement is ongoing.



Definitely contact a solicitor and don't communicate with the other party until then.

PS: Don't volunteer any information to the other party or even here (as you're communicating in public) about it until you've spoken to the solicitor.

Completely agree :) I'm happy to help on PM if I can

[Kent Accountant]

Really sorry to hear about your son. Loads of advicce and information on this site (http://www.cancerbackup.org.uk/Home). Hope it all works out for you

So far as the personal guarantee is concerned, it might be worth your while contacting an insolvency practitioner. They tend to deal with matters such as this on a regular basis and may well be able to advise you how best to negotiate with the factoring company

You can search for a local IP here (http://www.insolvency-practitioners.org.uk/ipsearch.aspx)

[The Dispute Resolver]

There are two issues:-

1. Your liability to the finance company under the guarantee. There may well be some issues as to any failure by the company to inform you when problems arose. The Agreement will be important and how it sets out their duties. Implied terms could be claimed such as the need to keep you informed. After all any lack of information may have prejudiced your rights to take action at an earlier time. It seems a reasonable point that if you guarantee the debts of a third party that the creditor advises you when that debt goes bad. Its certainly worth putting up such a defence if only as a negotiating tool.

In defending, you then have rights to disclosure of information and it may well turn out, given the amount of time that has elapsed, that there has been a failure by the finance company in relation to their actions with regard to the company/directors e.g did they recklessly allow the debt to grow etc (perhaps by placing too much reliance on your guarantee?).

2. You will have a right of action for indemnity from the directors. The contract, written or otherwise, you had with them was that you would sign the guarantee on the basis you were to be part of the company. That consideration has failed. Further, and in any event, there is an implied term that they would act at all times in a reasonable and proper manner in conducting the affairs of the company. If the financial problem has come about through bad management/decision making (there are usually plenty of opportunities with most companies to back up such a claim) then this give you an additional argument. They certainly have breached the implied duty to inform you when the debt went bad or was clearly going to go bad.

If you are sued then you must bring the directors into the proceedings as what are termed Part 20 Defendants, so that , if the finance company succeeds against yourself, and you succeed against the directors, then they ultimately suffer the judgment. It is essentially joining two actions together. You must notify the directors immediately.

If this debt cannot be met and makes you insolvent then yes I agree with Kent Accountant that you should be considering advice from an insolvency practitioner but beware that the IP will not be able to give you advice as to challenging the claim , or seeking an indemnity from the directors, merely advise you on any action to take to restructure your financial affairs IF the claim is valid. Also in general beware that there are some IPs who excessively encourage clients into IVAs. This is often not the best solution and can have very damaging effect on you for the future.

So first step is to assess your legal position. PM me to arrange for legal advice for you if you wish (from a specialist in the field I know not not myself) . Once that is known in detail it strikes me that this case is going to be capable of a mutually agreed solution that may not cost you at the end of the day. In other words its ideal (I know I say this for most cases here but, believe me, its true!) for mediation which of course I can provide. As my company provides an online mediation facility it can commence immediately not in weeks ahead.

I'm so sorry you have this problem given the news about your little boy. All I can say is that you can try to stop worrying too much about the guarantee because that certainly can be fought. I pray and hope the same goes for your son.

[Kent Accountant]

Primus. Without a doubt, Graham's suggestion is the best. My only problem historically has been to find a lawyer interested in settling a dispute and you definitely need to find an appropriately experienced lawyer. My reference to an IP was merely because they would have experience of advisiing directors in a similar position to your own when dealing with an insolvent company

[maxine]

Hi Graham

I read part of your post to mean Primus contact the directors of his old company immediately? Is that what you meant? I would have thought it better for him to seek legal advice first before approaching anyone directly involved in the claim?

Also, do you know of any funding assistance that may be available to the OP?

[The Dispute Resolver]

Yes, of course, he should take legal advice ( I asked him to PM me) but the point I was making that the other directors need to be notified ASAP.

No I am not aware of any funding for this sort of work. Thanks to 'New' Labour , civil legal aid has long ceased to exist in any meaningful way.

[Stonelaughter]

There are statutes of limitation (The Limitations Act) on ALL forms of debt; but as I don't know the legal name for this kind of debt, I have no idea how long it is. With Consumer debt, if there has been no 2-way correspondence between the creditor and debtor for six years, the debt is "Statute Barred" and cannot lawfully be pursued by the creditor.

[maxine]

My understanding is that it doesnt start to become a debt until the guarantee is invoked but I could be wrong.

[primus]

Thanks for the sugestion Stone - I checked this out and belive that this can only apply if no money has been paid on the debt by me or anyone else in the last six years. I suspect the account was active until recent months.

I'm not certain how this works in business, but as it seems its a personal guarentee it might well apply.

Im not fully aware of the facts behind the debt - hopefully will find out more today.

[deniser]

There are a number of things that can be looked at. For example, the possibility of having the document set aside because you were not told to seek independent legal advice before signing it. And as has already been mentioned, that you may have an implied indemnity from the other directors.

Has the document been signed as a deed ie. signed by you in the presence of an independent (ie. not one of the other directors) witness? There may be a technicality which prevents it from being binding. If it wasn't signed as a deed it may be void for lack of consideration.

The sooner you get a solicitor to look at this the better.

[The Dispute Resolver]

Yep - its six years from when the debt falls into default and the guarantee becomes live and enforceable not from when the debt was first set up.

[OldWelshGuy]

There is another angle here. and that is the unfair contract law element.

A contract has to be fair to be legal, and 'if' what you say about your signing the guarantee as a director, then being pushed out of the company, a court might decide that it would be unfair for RBS to hold you to such a one sided contract. The downside of this is that anyone can personally guarantee anothers debt!

It is very complicated, but there is a case to be answered by the other directors if they have acted as you say.

There might even be a case of fraud by negligence. Legal advice is the way forward without a shadow.