Are they still a creditor if......

Discussion in 'Insolvency' started by Lost Guy, Jan 29, 2018.

  1. Lost Guy

    Lost Guy UKBF Newcomer Free Member

    Posts: 4 Likes: 0
    Hi, my first post as a newbie. Found this great place as a result of company problems and having read the Spongebob Plan can now see some light at the end of a dark tunnel.
    I have a question that may appear stupid but it's one of many things I need to have clear in ,my head if I go down Spongebob Road.

    Me and another director have a small limited company providing an online service to a number of client organisations. To be able to access the services, clients have paid (mostly) small sums of money into their "account" with us and can then call off access to the services we provide at which time their account is reduced by the cost of the service accessed. Our problem has been that the number of "active" clients has dwindled over the last couple of years to a point where no fresh funds have been coming in and monies we have had on deposit have been used to pay server bills and to meet the costs of servicing those clients that still call off services. I should be clear that none of this deposited money has been used for salaries or wages, neither of the two directors have benefited personally from a single penny.
    We are at the point now where we are having to personally fund the cost of the servers, cover accountants bills etc and its a giant millstone around our necks. However Spongebob's plan seems like it could be a way out.

    A number of clients that we had deposited sums of money with us as long as 6 or 7 years ago, and quite a number of them have not made any contact with us in at least 4 to 5 years. I would hazard a guess that individuals we dealt with have either moved on or just plain forgotten about us.

    If we cease trading and have to write to our creditors as per step 2 of the plan, would we need to include those that have been dormant for so long? I'm guessing the answer is yes but it seems as though we would be having to point out something that they are not even aware of any longer and potentially creating more grief for ourselves.

    Any good advice would be very welcome!
     
    Posted: Jan 29, 2018 By: Lost Guy Member since: Jan 29, 2018
    #1
  2. Simon Green

    Simon Green UKBF Contributor Free Member

    Posts: 73 Likes: 8
    you both need plenty of good, sound common sense on this matter which I hope will be offered on this forum, but is HMRC included in the list of creditors?
     
    Posted: Jan 29, 2018 By: Simon Green Member since: Dec 4, 2017
    #2
  3. Lost Guy

    Lost Guy UKBF Newcomer Free Member

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    Hi, fortunately HMRC are not one of the creditors.
     
    Posted: Jan 29, 2018 By: Lost Guy Member since: Jan 29, 2018
    #3
  4. Gavin Bates

    Gavin Bates UKBF Regular Full Member

    Posts: 341 Likes: 60
    Hi

    You have already answered your question. Potentially they are creditors so should be included.

    Regards

    Gavin
     
    Posted: Jan 29, 2018 By: Gavin Bates Member since: May 9, 2016
    #4
  5. KAC

    KAC UKBF Enthusiast Free Member

    Posts: 576 Likes: 116
    Did you have any "terms and conditions"?

    If so, did they say anything about dormant accounts?
     
    Posted: Jan 29, 2018 By: KAC Member since: May 7, 2017
    #5
  6. Spongebob

    Spongebob UKBF Ace Free Member

    Posts: 2,102 Likes: 1,066
    If you didn't have anything in your terms and conditions stating that accounts were in some way time limited, all your clients with credit balances are creditors.

    You should send the Spongebob letter to all of them.
     
    Posted: Jan 30, 2018 By: Spongebob Member since: Dec 9, 2008
    #6
  7. Lost Guy

    Lost Guy UKBF Newcomer Free Member

    Posts: 4 Likes: 0
    Thanks, there is nothing in the T&C's that will help so I guessed that we may have to write to all of them. Most have a few hundred pounds to lose. A couple have up to £8000 so they may be more problematic.
     
    Posted: Jan 30, 2018 By: Lost Guy Member since: Jan 29, 2018
    #7
  8. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

    Posts: 1,691 Likes: 210
    I expect they will object to the striking off.

    Note that if they decide to Liquidate, you could be pursued personally by a Liquidator for not protecting the deposits.
     
    Posted: Jan 30, 2018 By: Lisa Thomas Member since: Apr 20, 2015
    #8
  9. Lost Guy

    Lost Guy UKBF Newcomer Free Member

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    that's not what I hoped to hear, seems as though we may never be able to get out from under this
     
    Posted: Jan 30, 2018 By: Lost Guy Member since: Jan 29, 2018
    #9
  10. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

    Posts: 1,691 Likes: 210
    It might not happen but you should be aware of the potential risk.

    The creditor would have to pay to put the Company into Liquidation if you don't do it yourselves.
     
    Posted: Jan 30, 2018 By: Lisa Thomas Member since: Apr 20, 2015
    #10
  11. Spongebob

    Spongebob UKBF Ace Free Member

    Posts: 2,102 Likes: 1,066
    Is this the case for all companies holding deposits from clients?

    What about a kitchen company which routinely takes deposits with orders in line with standard industry practice? If they go into liquidation are the directors vulnerable personally?
     
    Posted: Jan 30, 2018 By: Spongebob Member since: Dec 9, 2008
    #11
  12. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

    Posts: 1,691 Likes: 210
    Hi SB

    In theory yes.

    The funds should be placed in a separate client account held on trust for the creditors in the event of insolvency.

    What often happens in practice is the monies get merged in the general trade account and used so are unavailable to be repaid to the customers who then lose their money due to Directors not protecting the funds.

    It's not a problem when a business is solvent as it has the funds to repay so is often not something Directors think about until it is too late and they have spent the funds.
     
    Posted: Jan 30, 2018 By: Lisa Thomas Member since: Apr 20, 2015
    #12
  13. Nocash

    Nocash UKBF Newcomer Free Member

    Posts: 1 Likes: 0
    Hi SB
    I think that I have to close my business and I have an overdraft of about 4.5k. I went into the bank today and asked for a copy of the overdraft agreement - I wanted to check the terms of the personal guarantee. They said they didn't have it. I saw a letter you suggested to write to banks to make them give you a copy of the overdraft agreement - can I ask you to give that to me - I have been unable to find on this forum. Many thanks F
     
    Posted: Feb 1, 2018 By: Nocash Member since: Feb 1, 2018
    #13