I dont mean to sound like i am writing a novel below, but i feel if you have an insight into what has happened you may be able to help me.
I have a small limited co that has been trading for 7 years, A few years ago things were going really well, and the co was making reasonable profits,
As there is only myself employed by the company, it is very easy to put all your eggs in one basket as regards to working for big companies. About 2 years ago 90% of my work was with one company that pulled out of the uk, they did pay but i was left struggling to find new customers. and as a result meant no profits for that year. On top of that i spent 4 months off work with a bowel disease, which my critical illness cover wouldnt pay out.
I have since been struggling with everything but continued to carry on as i am in a position that no PAYE job in my trade will cover my mortgage and personal loans.
last year i had a company go bust on me owing £2k, and last week i have just had another go bust owing me £8000. There account had been on stop for over a month, which was hurting anyway as this was 60% of my work.
I am already on a payment plan with hmrc, and payment plans for VAT, this has been kept up to date for the past 14 months until now.
I now find myself in a situation where i no longer have the money to go to work, I have suppliers to pay and even "friends" who have done work for me. The most frustrating thing is the companies that have gone bust all start up the next day, have all there assets and call themselves the same name albeit add something to the end of it.
I dont want to admit defeat but i know this is the beggining of the end for me.
Now you have a brief idea as to how i have come to be in this mess, i would like to ask for help and ideas into how i should move forward if at all.
I have a Service based business, my assetts are a van (on finance but positive equity) hand tools, and general office stuff. I have been taking a set divedend each month but this has been to pay the bills, mortgage etc. I know that it can be looked at that i have acted irresponsibly, but i have had to keep the mortgage and bills paid, ive not had money for nights out holidays etc, but i think the HMRC would not care what the money was for.
If i were to start again and, if i act now is it possible to take my tools and office equipment and transfer them to the new company?
If i spoke the the finance company and told them my circumstances would they be likely to transfer the van to the new company rather than losing out.
and Finally is any of what i asked Legal.
I hope from what i have wrote you can see i am not one of those "take every one for a ride" companies. i have no personal savings or assets to raise finance should any organisation decid to make me personably liable. In fact i have been using personal credit cards to fund buying fuel and parts to run the business, so i have lost that anyway!
Firstly, from reading your 'novel', it would appear that the best course of action would be to place the company into administration. However, you should carry out the 'insolvency test', which is the cash flow test, balance sheet test and the legal action test (you will find an explanation of these tests and how to carry them out on the internet). If your company is insolvent, as an officer of the company you must ensure that it ceases trading immediately.
You must understand (and probably you do), that your limited company is a separate legal entity to you. Therefore, it is the limited company that is responsible to the creditors and not you personally. Conversely, it also owns assets, which will include debtors, the equity in the van, tools and no doubt others like computers, office furniture etc (which should all be on the balance sheet). Therefore, you cannot just cease trading and 'transfer' the assets to your new trading vehicle - it will be the administrator who you need to approach and make an offer to purchase. The legal owner of the van will repossess it and then you must approach the owner and make an offer.
As a limited company, unless you have signed any agreements (ie Personal Guarantees) that make you liable for any debts of the company (perhaps the van?), you will not be liable. However, in my experience, many PG's are executed wrongly and cannot be enforced, so look carefully at theses and seek legal advice.
Regarding taking the company name and trading in a similar style (known as a phoenix company), you will be treading a very risky path, as you could in the future become personally liable should your new venture fall into trouble (google phoenix companies for a better understanding).
Your outline to your problem does worry me however, as you say you have no savings etc, and yet you are still taking out dividends - HMRC will come after you for tax at some future point as there has been no corporation tax paid. Also, if the limited company is insolvent, you should not be taking out profit as there is no profit there.
I hope things improve for you in the future.
The Following User Says Thank You to Charlie Paynter For This Useful Post:
I'm sure that everything Charlie says is true Mark, but I suspect that what you really want is practical advice on what you can do and what you can get away with.
You already seem to have the right idea. Set up a new limited company and register the van in NewCo's name at DVLA. If the van is on HP then it actually belongs to the finance company until the final payment is made. OldCo has technically no interest in it!
Complete any work in progress and all new work through NewCo. Write to all creditors of OldCo informing them that the company has ceased trading due to insolvency and has no assets or funds with which to appoint a liquidator. Invite creditors to initiate winding up proceedings against the company.
Eventually HMRC will do just that, the company will be wound up and the Offiial Receiver will be appointed liquidator. This process is likely to take one or two years from now. In the meantime the company's other creditors will simply go away as they know that any further money spent chasing their debt will not be recovered. You can set about building up your new business wih a clean slate. It is unlikely that he OR will ever ask any difficult questions about the tools or the van, which by that time will probably need replacing anyway!
In the circumstances he will not be too harsh on 'illegal' dividends either. It was bad debts which brought the company down...
...wasn't it?
Good luck. PM me if you need more detailed advice.
Bob
Last edited by Spongebob; 8th March 2010 at 06:18.
The Following User Says Thank You to Spongebob For This Useful Post:
I should have added that if you are able to collect any of OldCo's debts then it would not be unreasonable to use this money to pay yourself any salary that might be owed or any legitimate expenses that you have charged to your personal credit card.
Technically the OR could challange it but my experience is that he won't, so long as you can give him a genuine explaination of how the company failed.
Worst case is that you have to pay it back - which would only leave you in the same position that you are in now. That is very unlikely, though!
Bob
Last edited by Spongebob; 8th March 2010 at 06:48.
Can I PM you about a similar problem...I have already sent you a message but not sure if you received it...it is rather long and possibley another novel!
Hi Mark, sorry to hear of your problems mate, I went through almost exactly the scenario you describe, started insolvency proceedings in September and have only just had the company struck off.
I'm not into novel writing to tell you how I went about it, plus forums have big ears, but if it helps send me a PM and we can talk on the phone.
Can I PM you about a similar problem...I have already sent you a message but not sure if you received it...it is rather long and possibley another novel!
Regards
I got your PM, Raine. Sorry I haven't been able to reply yet; I'm working 14 hour days right now!
Just want to say thanks to Bob and Charlie who have given both sides to the same coin. I have often wondered how companies get away with that kind of thing. 1 quick question though, doesn't being a director or a bankrupt company have some negative effect, like you can be barred from being a company director in the future?
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Philip Brassington
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Just want to say thanks to Bob and Charlie who have given both sides to the same coin. I have often wondered how companies get away with that kind of thing. 1 quick question though, doesn't being a director or a bankrupt company have some negative effect, like you can be barred from being a company director in the future?
Being a director of a failed company (ie one that enters administration), and being disqualified from holding office for a period are completely separate things. Your company can fail yet there is nothing barring you from starting up a new limited company.
However, you can be disqualified from being a director (by the court) for a number of reasons including allowing a company that is insolvent to continue to trade and not keeping proper accounts records.
Being a bankrupt or having a limited company go down has not the same stigma attached to it as it did say 30 years ago.
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