Can a compulsory liquidation be reversed?

holiam · Apr 27, 2019

Without going too much into the backdrop, but a few years ago whilst suffering from a mental illness Anxiety fuelled Depression, one of the main changes for me was my inability to deal with confrontation leading to a spell of not being able to open brown envelopes, which was the same time as APN's were landing on the doorstep. Also led to unemployment and total loss of confidence.

Fast forward 2 years, and my company was put into compulsory liquidation by HMRC (accounts were 2 years behind - to be fair, again not something I would normally do) due to them estimating my DL account to be in excess of 200k

During the following months, with my old accountants working on best endeavours as I could no longer afford to pay, my remaining accounts were produced (as requested by Liquidator) and posted with one major omission, they did not contain any dividends - accountant used a portal system, but for some reason didn't get pulled in. At that specific time, I was in a particular bad place and didn't notice this mistake at the time.

Anyway forward on about a year and with a £124,000 Bankruptcy order 65k of which are costs incurred/charges (eye watering) (yes, 1 man contractor, no office, equipment / machinery, no staff and no assets and was not trading prior to liquidation, only HMRC debt)

Anyway, recently I came to notice dividend and some pension payments were missing from the rushed late accounts, and when reworked results in a positive DLA. So had this not happened, then I would not have had any personal liability and I'm pretty sure HMRC would have not objected to the wind-up

I will look to get legal support, but wanted to know if anyone had suggestions on how best to play this. The IP have been awful and very unhelpful - feels like the latest Bankruptcy notice is more out of spite knowing that I would never be able to working again in the only industry I've ever worked making any future repayment extremely unlikely.

I have about £70k equity in my home, no savings of any kind and HMRC APN/Loan debt of c.110k, and £30k credit card debt, been unemployed for about a year but now that I'm on the way back from my mental illness, it should be too long before I am able to work (assuming my credit remains good)

All suggestions welcome

Lisa Thomas · Apr 29, 2019

Have you actually been made Bankrupt?

holiam · Apr 29, 2019

Lisa Thomas said:
Have you actually been made Bankrupt?

Hi Lisa, not yet, but they have issued a statutory Demand Bankruptcy (Scotland) ACT 2016 for the absolute crazy sum of £240k for an inaccurately DLA assessed amount of £108k, which resulted in my 1 and only creditor (HMRC) being owed £42k (the tax liability of the DLA).

1 was a one man band, no building, plants, machinery, staff no assets with no debtors and 1 creditor for the amount I mentioned above. My old accountant and I completed the 2 missing accounts, so I would have assumed this should have been a simple insolvency.

Oh, and if you saw the strapline a few months ago on how much PWC hourly charge was on the Corillion liquidation, My LP charges more

Lisa Thomas · Apr 29, 2019

Do you have any other personal creditors?

Have you contacted the Lqrs with the revised accounting information?

I cannot comment on Scottish Insolvency law but in the UK the dividends can be challenged as illegal, if they were paid when there were insufficient reserves so the revised figures you have might not actually end up with a DLA in credit.

Mr D · Apr 29, 2019

Lisa Thomas said:
Do you have any other personal creditors?

Have you contacted the Lqrs with the revised accounting information?

I cannot comment on Scottish Insolvency law but in the UK the dividends can be challenged as illegal, if they were paid when there were insufficient reserves so the revised figures you have might not actually end up with a DLA in credit.

In England & Wales.
UK does include Scotland at this point in time.

Lisa Thomas · Apr 29, 2019

My insolvency license does not and the law is different.

holiam · Apr 29, 2019

Lisa Thomas said:
Do you have any other personal creditors?

Have you contacted the Lqrs with the revised accounting information?

I cannot comment on Scottish Insolvency law but in the UK the dividends can be challenged as illegal, if they were paid when there were insufficient reserves so the revised figures you have might not actually end up with a DLA in credit.

Meeting with my solicitor on Wednesday. Accountant believes that timing of the dividends are justified with respect to the financial position of company, so should be ok.

G

UK Contractor Accountant · Apr 30, 2019

Were proper Board Meeting Minutes drawn up at the time to approve these dividends and were they supported by reliable Management accounts to prove they were legal dIvidends at the time of payment?

How were these dividend payments described in the accounting records and in the bank entries?

The above questions will need to be addressed before the IP will even consider any restatement.

Lisa Thomas · Apr 30, 2019

"so should be ok."

G[/QUOTE]

'Should' is the key word here...

holiam · Apr 30, 2019

UK Contractor Accountant said:
Were proper Board Meeting Minutes drawn up at the time to approve these dividends and were they supported by reliable Management accounts to prove they were legal dIvidends at the time of payment?

How were these dividend payments described in the accounting records and in the bank entries?

The above questions will need to be addressed before the IP will even consider any restatement.

Thank you for your response. I am (was) an IT contractor, sole director, small company and yes I know this does not excuse me from my statutory responsibilities as LTD director but due to an extremely stressful personal situation back in 2015 I started over a period of time, experiencing changes in behaviour, loss in all confidence and became unable to deal with confrontation. Obviously this eventually made contracting impossible and after several visits to GP and Mental Illness professionals, I was diagnosed with Anxiety fuelled depression.

I mention this because (and I know this sounds ridiculous now) but soon after the incident in 2015, I just stopped opening any HMRC correspondence for fear of further episodes. Obviously this led to the position I now find myself in.

IP was made aware of this and this was discussed during my initial meeting with them but they seem hell bent on maximising their costs for what I would have assumed been a relatively straight forward process, given I had no company assets.

The irony is if personal bankruptcy action continues over a very small, if any DLA debt, then I will be unable to ever work in the financial industry again, an industry I have worked in all of my 25 working years and which is likely to result in no further HMRC tax liabilities.

Hopefully a common sense will prevail....

Lisa Thomas · May 1, 2019

Whilst I sympathise with your situation, if the Liquidator believes you owe £240k to the Company they cannot drop the claim because they sympathise.

You need to instruct an Insolvency Solicitor as soon as possible to liaise with the Liquidator over the debt, otherwise it seems Bankruptcy is inevitable and you will lose your home.

holiam · May 1, 2019

Apologies, I seem to have provided wrong figures above Lisa.

Summary
Revised DLA 120k (I challenged which led to the discovery that dividends were not applied
HMRC claim on above £35k
Total Cost Creditors £43k includes interest on HMRC claim
IP total cost & outlays @ Q4 2018 - £45k
Total demand from IP - £87k (over 2 years to get to this point ?!?)

Q2 2019
Noticed IP had omitted dividends details that accountant provided from revised accounts.
I've just received the revised DLA balance from accountant after legal dividends were applied which now stands at £20k

At the same time, I received a statutory demand from IP with a new total settlement figure of £140k (not 240k as mentioned above) with no correspondence or detail on how/why this has jumped up by £55k

I have an IP solicitor on board so hopefully progress can be made quickly.

Lisa Thomas · May 7, 2019

Best of luck.

As I stated previously the dividends may well be challenged as illegal.

Please keep the forum updated as to how you get on?

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