Need advice

[afamilyfriend]

Someone I know is in a sticky situation and I can see how ill they've become from the stress so would really like to help them, and came across this site. They owned a restaurant which owes a huge VAT bill, a bounce back loan, and money to EON too. Because the accounts weren't submitted on time, Companies House did the compulsory strike off. She saw this and told her accountant, as she has provided all the necessary accounts to him. She then saw that the strike off had been suspended. She assumed this was because her accountant had contacted Companies House and sorted things. It's important to note that English is not her first language which is why she has an accountant in the first place, to take care of the things she has no idea about.

Fast forward some months later and the business is failing. Her business bank account was closed without warning. She states she did ask them why but didn't get a great answer. I suspect it may be because the strike off still saying suspended but can't be sure. She was told the funds that were in the account (around 6k) were put towards the remaining bounce back loan debt. Before the account was closed, she was making the repayments on time.

So she owes the remaining bounce back loan debt, EON, and the VAT. She ceased trading over a year ago but EON are still sending letters saying they'll take her to court for the amount owed. She is terrified of going to Court because 1) her English isn't great and she is concerned this will work against her and 2) because after telling me everything, it's clear she didn't act as a good Director and will 100% be questioned on a lot of the things she did in terms of how it's legally considered wrongful trading. Things such as continuing to trade despite the company making no money. And the BBL funds probably weren't used in the best way.

We dont know why the strike off is suspended and she is too scared to contact Companies House and ask in case this triggers a HMRC investigation. We're not sure who is objecting it, because it was suspended the first time before the bank account was even closed so payments were still being made. Is it fair to assume that it could still be Barclays and that they objected the strike off because despite regular payments being made, there was outstanding debt? She is asking me if she comes to a solution with Barclays and EON, will she then be able to dissolve the company. I've advised against this as I've read that paying one creditor over another can get her in even more trouble.

Where do we go from here? Goes without saying that paying for an Insolvency Practitioner is out of the question. On Companies House the first notice for compulsory strike off was in December 2020 and then the strike off was suspended in January 2021. No further updates after that.

 

[Gyumri]

The answer is for your friend to stop worrying as there is nothing to be done. Either the company will be struck off eventually or some creditor like the bank or HMRC may take steps to wind it up.

I would however at least make an attempt to write to the creditors especially HMRC to explain the pickle your friend's restaurant got into and leave it at that.

As all the debts like the electricity would presumably be in the company's name then they belong to the company and there would be no point in anyone taking the company to court.

As for wrongful trading it's not wrong to keep trading at a loss provided one keeps the interest of creditors in mind and doesn't rack up losses for them.

 

[DontAsk]

Has she signed any personal guarantees for any of the debts?

 

[Frank Wessely]

Someone I know is in a sticky situation and I can see how ill they've become from the stress so would really like to help them, and came across this site. They owned a restaurant which owes a huge VAT bill, a bounce back loan, and money to EON too. Because the accounts weren't submitted on time, Companies House did the compulsory strike off. She saw this and told her accountant, as she has provided all the necessary accounts to him. She then saw that the strike off had been suspended. She assumed this was because her accountant had contacted Companies House and sorted things. It's important to note that English is not her first language which is why she has an accountant in the first place, to take care of the things she has no idea about.

Fast forward some months later and the business is failing. Her business bank account was closed without warning. She states she did ask them why but didn't get a great answer. I suspect it may be because the strike off still saying suspended but can't be sure. She was told the funds that were in the account (around 6k) were put towards the remaining bounce back loan debt. Before the account was closed, she was making the repayments on time.

So she owes the remaining bounce back loan debt, EON, and the VAT. She ceased trading over a year ago but EON are still sending letters saying they'll take her to court for the amount owed. She is terrified of going to Court because 1) her English isn't great and she is concerned this will work against her and 2) because after telling me everything, it's clear she didn't act as a good Director and will 100% be questioned on a lot of the things she did in terms of how it's legally considered wrongful trading. Things such as continuing to trade despite the company making no money. And the BBL funds probably weren't used in the best way.

We dont know why the strike off is suspended and she is too scared to contact Companies House and ask in case this triggers a HMRC investigation. We're not sure who is objecting it, because it was suspended the first time before the bank account was even closed so payments were still being made. Is it fair to assume that it could still be Barclays and that they objected the strike off because despite regular payments being made, there was outstanding debt? She is asking me if she comes to a solution with Barclays and EON, will she then be able to dissolve the company. I've advised against this as I've read that paying one creditor over another can get her in even more trouble.

Where do we go from here? Goes without saying that paying for an Insolvency Practitioner is out of the question. On Companies House the first notice for compulsory strike off was in December 2020 and then the strike off was suspended in January 2021. No further updates after that.

Hi afamilyfriend

Sorry to read about this very difficult situation that your friend is facing.

1. The suspension of the strike off process is likely to be due the the Bank objecting because of the Bounce Back loan. Banks are objecting in every such case where there is a proposed strike off. As things stand, the objection will probably stay in place for some two years or more.

2. I assume the business is about to fail imminently as it does not have a bank account.

3. Nothing you have said indicates whether she has failed in her duties as a director or not. She may have tried hard and made some mistakes. That does not necessarily mean that she is a “bad” Director.

4. The point which concerns me is the comment “And the BBL funds probably weren't used in the best way”. What do you mean by that?

5. I do not see how she can reach “a solution” with Barclays and Eon given that there are also monies due to HMRC and probably other creditors too and maybe staff as well. That would be a preference if paid with company funds.

6. It appears that your friend wants to find the best and tidiest way to close down the company. You say that there are no funds to pay an IP but she could “come to a solution” with two of the creditors. That seems contradictory. There appear to be funds available but it is a case of finding the best way to use them.

7. It depends how quickly your friend wants to resolve this situation. She could let Eon take the company to court and then they might eventually apply to Court to wind it up. That would not cost her anything but you could be looking at 6 months to a year or more before it ends up in liquidation.

8. Alternatively I would be happy to have an exploratory call without charge to see what other options there might be. Then your friend can make an informed decision. Also I would clarify whether she does have anything to worry about or not, in respect of her conduct as a director. My contact details are below.

I hope that this helps.

Thanks.

 

[afamilyfriend]

As all the debts like the electricity would presumably be in the company's name then they belong to the company and there would be no point in anyone taking the company to court.

Eon are already trying to take the company to court

 

[afamilyfriend]

Has she signed any personal guarantees for any of the debts?

Nope

 

[afamilyfriend]

Hi afamilyfriend

Sorry to read about this very difficult situation that your friend is facing.

1. The suspension of the strike off process is likely to be due the the Bank objecting because of the Bounce Back loan. Banks are objecting in every such case where there is a proposed strike off. As things stand, the objection will probably stay in place for some two years or more.

2. I assume the business is about to fail imminently as it does not have a bank account.

3. Nothing you have said indicates whether she has failed in her duties as a director or not. She may have tried hard and made some mistakes. That does not necessarily mean that she is a “bad” Director.

4. The point which concerns me is the comment “And the BBL funds probably weren't used in the best way”. What do you mean by that?

5. I do not see how she can reach “a solution” with Barclays and Eon given that there are also monies due to HMRC and probably other creditors too and maybe staff as well. That would be a preference if paid with company funds.

6. It appears that your friend wants to find the best and tidiest way to close down the company. You say that there are no funds to pay an IP but she could “come to a solution” with two of the creditors. That seems contradictory. There appear to be funds available but it is a case of finding the best way to use them.

7. It depends how quickly your friend wants to resolve this situation. She could let Eon take the company to court and then they might eventually apply to Court to wind it up. That would not cost her anything but you could be looking at 6 months to a year or more before it ends up in liquidation.

8. Alternatively I would be happy to have an exploratory call without charge to see what other options there might be. Then your friend can make an informed decision. Also I would clarify whether she does have anything to worry about or not, in respect of her conduct as a director. My contact details are below.

I hope that this helps.

Thanks.

Thanks so much for the detailed response. With regards to your points.

Yes the business has already failed. It stopped trading over a year ago, immediately after the bank account was closed as there was no way to carry on without it or the funds in that account.

The BBL funds I'm not entirely sure what she did with them. She took out the loan during covid when the restaurant was in a difficult position because of all the lockdowns but wasn't in debt at that stage. I'm not sure exactly what it was spent on. But I do know that the repayments were being made regularly until the bank account was closed and that Barclays said the remaining funds in the account went towards the loan.

When she said about reaching a solution with Eon and Barclays. She has been sent threatening letters from both. Mostly from Eon who have even sent bailiffs round before they threatened court action. And again, with English not being her first language and her never being in any kind of trouble with police or any civil court for anything, she's just terrified. I think she was being told by Eon that she could set up some sort of payment plan which she was considering doing and paying out of her own money. That's how she would've paid Barclays too, just to stop the letters coming. Again, I have advised her against both telling her it would only get her into more trouble so she's sitting tight for now, but she is scared.

She doesn't have the thousands required for an Insolvency Practitioner, any money she could've got together to stop Eon and Barclays would've been in small payments over the course of a payment plan. Thank you so much for offering the free phone call but again as she doesn't speak great English I'm just trying to get as much info as possible so I can go back to her with it and explain it all at once. If she was to speak on the phone I'd probably have to translate.

 

[afamilyfriend]

Also worth adding that she does have a previous company that was dissolved in 2018. It owed VAT and her accountant was the person who went about dissolving the company at that time. I think this is why she's extra scared of being taken to court over her problems now. Because when winding up the company that owes VAT, Eon, and Barclays, they'll inevitably look into her previous dissolved company too and she'll be questioned about that. She's worried it'll massively work against her that she owed VAT for one company and dissolved it and now owes VAT for this one too which has been in a period of limbo regarding strike off for 2+ years now

 

[Frank Wessely]

Thanks so much for the detailed response. With regards to your points.

Yes the business has already failed. It stopped trading over a year ago, immediately after the bank account was closed as there was no way to carry on without it or the funds in that account.

The BBL funds I'm not entirely sure what she did with them. She took out the loan during covid when the restaurant was in a difficult position because of all the lockdowns but wasn't in debt at that stage. I'm not sure exactly what it was spent on. But I do know that the repayments were being made regularly until the bank account was closed and that Barclays said the remaining funds in the account went towards the loan.

When she said about reaching a solution with Eon and Barclays. She has been sent threatening letters from both. Mostly from Eon who have even sent bailiffs round before they threatened court action. And again, with English not being her first language and her never being in any kind of trouble with police or any civil court for anything, she's just terrified. I think she was being told by Eon that she could set up some sort of payment plan which she was considering doing and paying out of her own money. That's how she would've paid Barclays too, just to stop the letters coming. Again, I have advised her against both telling her it would only get her into more trouble so she's sitting tight for now, but she is scared.

She doesn't have the thousands required for an Insolvency Practitioner, any money she could've got together to stop Eon and Barclays would've been in small payments over the course of a payment plan. Thank you so much for offering the free phone call but again as she doesn't speak great English I'm just trying to get as much info as possible so I can go back to her with it and explain it all at once. If she was to speak on the phone I'd probably have to translate.

Hi afamilyfriend

Thanks for the additional information.

To save time and typing(!) I suggest again that you give me a call later today. You are going to have to translate the feedback anyway.

Thanks.

 

[Gyumri]

I think this is why she's extra scared of being taken to court over her problems now.

She cannot be taken to court if they are company debts. Nobody can sue her personally by the sound of it and it would be pointless in anybody suing the company which has ceased trading one year ago.

She's worried it'll massively work against her that she owed VAT for one company and dissolved it and now owes VAT for this one too

The failure of the previous company is irrelevant and history. That said, if she wants to register for VAT again then HMRC may require a deposit to be paid in advance but even that is unlikely as many directors have left behind VAT debts from previous companies.

There is no basis for debt collectors calling at your friends house over debts of the company so she will have to politely tell them to take a running jump and don't bother to leave their calling card - or words to that effect.

 

[Lisa Thomas]

HMRC and/or the Bank will have automatically objected to the strike off.

If the company has ceased trading and has no assets then letting it be dissolved and struck off in due course may well be the best option and I'm sure Frank will explain all that if you speak.