Company Directors in trouble with liquidator

[Venus888]

Any company directors here who have had a bad experience with a liquidator? I am dealing with very difficult situation liquidating my limited company which stopped trading during the pandemic. I think I was scammed by the liquidator who didn’t explain the process of Creditors Voluntarily Liquidation (CVL) to me at the outset and the consequences on me personally. I am looking for other directors that had similar experience. The liquidator is accusing me of preferential payments and/or Directors Loan Account. Any advice is much appreciated it.

 

[Mark T Jones]

And did you make preferential payments, or withdraw money abnormally?

 

[WaveJumper]

And did you make preferential payments, or withdraw money abnormally?

Just a wild guess ......... Yes

 

[Lee Green]

To be clear, as an Insolvency Practitioner there is only so much information we have at the outset to advise directors on. It is not common for an IP to conduct a bank analysis prior to the appointment to establish whether there is an overdrawn directors loan account ("DLA"). Obviously if there is already a DLA detailed in the most recent accounts then this should have been discussed.

Regrettably it is more and more common to establish post appointment that there is an overdrawn directors loan account. However, I always make a point of specifically questioning the directors on how they have been remunerated. I, as i suspect most good IPs would, also explain all the risks to directors. Equally, this is typically followed up by an options letter which summarises all of the options and further outlines the antecedent transactions to be mindful of.

But at the end of the day, if you have committed preference payments and have an overdrawn directors loan I am not quite sure why you feel this is the IPs fault.

 

[Mark T Jones]

But at the end of the day, if you have committed preference payments and have an overdrawn directors loan I am not quite sure why you feel this is the IPs fault.

And if not, you just need to demonstrate it, with facts & evidence

remember, the IP doesn't work for you - their primary responsibility is to your creditors.

 

[UK Contractor Accountant]

Is there a Bounce Back Loan involved here by any chance?

 

[UK Contractor Accountant]

I think I was scammed by the liquidator who didn’t explain the process of Creditors Voluntarily Liquidation (CVL) to me at the outset and the consequences on me personally

I dont think you were you were scammed - not fully informed maybe.

Anyway that doesn't change anything, Any IP appointed has to go through the same process and recover as much of the assets of the company as possible for the benefit of the creditors, which in the majority of cases for OMB's is NIL.

 

[Lisa Thomas]

It's frustrating the IP didn't explain the investigation process to you before the company was liquidated.

Unfortunately this is a tactic by some IP's (not me!), because they don't want to put you off instructing them.

However I suspect if you revisit their engagement documents, somewhere in there it will explain about the investigation and their statutory requirement to carry it out, and report their findings to the Insolvency Services, who can take further action against you.

How much is the claim?

 

[UK Contractor Accountant]

Obviously if there is already a DLA detailed in the most recent accounts then this should have been discussed.

And I would advise agreed in writing, before appointment, the deal regarding repayment terms, scale of write off for lump sum settlement etc.

 

[Venus888]

And did you make preferential payments, or withdraw money abnormally?

No, I didn’t. I was paying myself on monthly basis. Some months I didn’t pay myself at all and then the others I paid myself more. Depending on the situation and of course I was modest with spending because it was during the pandemic and business was 50 % down.

I was paying for all other outstanding obligations of the company. I never owed anyone. HMRC bill was on payment plan and up to date and BBL repayments were not due yet.

 

[Venus888]

And I would advise agreed in writing, before appointment, the deal regarding repayment terms, scale of write off for lump sum settlement etc.

The IP told me not to file last set of accounts. He literally stopped me talking to my accountant and told me to go through bank statements myself and calculate my DLA, but I didn’t know how to do that, hence the figure I gave him is incorrect. Now I know because I eventually went to my accountant when all this trouble with the liquidator started and she kindly went back and calculated the DLA for me until the cessation of the business, which is a much smaller amount (£3k) that the one the liquidator is claiming, but he doesn’t want to accept it.

 

[Venus888]

It's frustrating the IP didn't explain the investigation process to you before the company was liquidated.

Unfortunately this is a tactic by some IP's (not me!), because they don't want to put you off instructing them.

However I suspect if you revisit their engagement documents, somewhere in there it will explain about the investigation and their statutory requirement to carry it out, and report their findings to the Insolvency Services, who can take further action against you.

How much is the claim?

It's frustrating the IP didn't explain the investigation process to you before the company was liquidated.

Unfortunately this is a tactic by some IP's (not me!), because they don't want to put you off instructing them.

However I suspect if you revisit their engagement documents, somewhere in there it will explain about the investigation and their statutory requirement to carry it out, and report their findings to the Insolvency Services, who can take further action against you.

How much is the claim?

They escalated it to £45k now. First they were only talking about DLA, but now they came up with the accusation of preferential payments and added up everything that I ever paid myself in the last 2 years (which wasn’t on payslip) and they want it back.

 

[UK Contractor Accountant]

I think we are taking about unlawful dividends here.

IP reclassifying dividends as loans. You have to prove, with the help of your Accountant, they were lawful at the time of payment. The IP cant stop you engaging an Accountant to act for you personally.

 

[japancool]

No, I didn’t. I was paying myself on monthly basis. Some months I didn’t pay myself at all and then the others I paid myself more. Depending on the situation and of course I was modest with spending because it was during the pandemic and business was 50 % down.

I was paying for all other outstanding obligations of the company. I never owed anyone. HMRC bill was on payment plan and up to date and BBL repayments were not due yet.

Here's the problem. You say your payments to yourself weren't on payslips. Did you issue dividend vouchers? If not, then the IP can't distinguish between any payments you made to yourself as remuneration or for other purposes, for example to reimburse expenses.

In addition, if you didn't pay yourself through payroll, then you DID misuse your BBL. You weren't allowed to take BBL funds out as dividends.

It's not uncommon for an IP to take a different view about some payments to an accountant.

 

[Venus888]

My accountant issued dividend vouchers to me which credited my DLA. The financial position of the company at the time was okay. There was £45k balance in the company bank account. The BBL was fully outstanding £30k. The dividends were £12k. So dividends were paid out of profit. Does this suggest misuse of BBL funds? I hope not because there would have been still the full amount of the BBL funds kept in the company bank account at the time.

 

[brucegreig]

This: "So dividends were paid out of profit"

Doesn't necessarily follow from: "There was £45k balance in the company bank account. The BBL was fully outstanding £30k."

It shows that the dividends were paid from cash the company had available, and not from the BBL. But it doesn't show they were paid from available profits.

Dividends have to be paid out of profits that have accumulated in the company.

To keep things simple, of the £45k in the bank, £30k was owed to BBL. Was any of it owed to anyone else? Presumably there must have been other creditors, otherwise the company would not have gone into creditors' liquidation. So I think some of your remaining £15k (45-30) must have been owed to other people, and so should not have been distributed as a dividend to shareholders. Hard to be sure without seeing the whole balance sheet, but it does look that way, tbh.

 

[Lisa Thomas]

You need an insolvency solicitor to argue/defend/negotiate the claim with the Liquidator. Happy to recommend one if you want to DM me.

 

[Venus888]

This: "So dividends were paid out of profit"

Doesn't necessarily follow from: "There was £45k balance in the company bank account. The BBL was fully outstanding £30k."

It shows that the dividends were paid from cash the company had available, and not from the BBL. But it doesn't show they were paid from available profits.

Dividends have to be paid out of profits that have accumulated in the company.

To keep things simple, of the £45k in the bank, £30k was owed to BBL. Was any of it owed to anyone else? Presumably there must have been other creditors, otherwise the company would not have gone into creditors' liquidation. So I think some of your remaining £15k (45-30) must have been owed to other people, and so should not have been distributed as a dividend to shareholders. Hard to be sure without seeing the whole balance sheet, but it does look that way, tbh.

This is the main issue, that’s why I think I was tricked by the liquidator to sign up with them, because the company didn’t have any major debts. Only about £5k to HMRC which was on payment plan and I never missed a payment. Also, I used personal funds in the past to pay for vat, business rates and purchase of equipment which I was never reimbursed for and it was never accounted for in the company’s accounts. So the company owes me money too.

 

[DontAsk]

Also, I used personal funds in the past to pay for vat, business rates and purchase of equipment which I was never reimbursed for and it was never accounted for in the company’s accounts.

Why not???

So the company owes me money too.

Not if the money hasn't been accounted for correctly.

 

[AlanJ1]

This is the main issue, that’s why I think I was tricked by the liquidator to sign up with them, because the company didn’t have any major debts. Only about £5k to HMRC which was on payment plan and I never missed a payment. Also, I used personal funds in the past to pay for vat, business rates and purchase of equipment which I was never reimbursed for and it was never accounted for in the company’s accounts. So the company owes me money too.

Someone may correct me if I am wrong here but:

If you are on a payment plan it means you didn't have the funds to pay HMRC all of what was owed in one go, how are you then able to pay yourself a £12k dividend?

 

[Lisa Thomas]

What was the deficiency on the Statement of Affairs?

 

[Venus888]

What was the deficiency on the Statement of Affairs?

Estimated total deficiency/surplus as regards members was £40k

I am not sure if this is the answer to your question as there is also “estimated deficiency/surplus of assets after floating charges” which was £3,000 on the Statement of the Affairs.

Thank you so much for your valuable comments and feedback. I really appreciate it!

 

[ukb]

It seems the director is saying she wasn't informed by the IP about her overdrawn directors loan before the CVL began. IMO it should be illegal for an IP not to explain in detail to a director the impact their DLA will have on them personally before the CVL begins, and the director should be given a written estimate of how much it will cost them on a piece of paper they have to sign along with the IP, that describes that alternative options open to them and why they weren't chosen.

My experience seems barely believable, but this is what actually happened, and I have all the docs to show it.

I went to an IP at the end of June 2020 and after a 10 minute phone call with the IP's managing director he recommended a CVL. I was a sole director and shareholder of my company. I had a DLA on my accounts from the previous year, but did not at the time understand it's significance if I used a CVL for insolvency,

On 2nd July 2020, I received an AML/ID onboarding email from the IP.

On 7th July 2020 I received 4 more onboarding documents from the IP in an email that said "It is imperative that this information is returned to our office as a matter of urgency from you within the next 3 working days". I hadn't completed the AML docs at this point.
1. Letter of Engagement
2. Letter of Authority
3. Pension Scheme Declaration
4. Board meeting minutes

They all seemed like run-of-the-mill onboarding docs so I signed them .

I didn't notice until much later, and after I'd signed it, that - 4. Board meeting minutes - wasn't a usual onboarding document it contained "minutes" of a "board meeting" dated 2nd July 2020 i.e. the same day I'd been sent my AML/ID checking link, and a day I definitely didn't have a board meeting.

The "minutes" of the "board meeting", stated that a director from the IP and the IP's liquidator were both "in attendance" at a meeting with me, and the "minutes" also noted:
" 1. The financial position of the Company was discussed and it was agreed that steps
be taken to place the Company into Creditors’ Voluntary Liquidation.
2. It was resolved that written resolutions would be circulated to the members of the
Company to consider and if thought fit, pass the following resolutions:
a) That the Company be wound up voluntarily;
b) That XXXX be appointed liquidator of the Company for the purposes of the voluntary winding-up.

Resolution (a) being a Special Resolution and other resolution being an Ordinary
Resolution."

There is no record of any invitations, emails, calendar entries, meeting agenda etc. being sent to the meeting's listed participants, and the IP's engagement letter hadn't even be sent at the time of this "board meeting".

TBC there was no board meeting, just minutes that, for me, prejudicially "agreed" a CVL without having the inconvenience of discussing it with me and explaining the DLA impact. So like Venus888, I was not informed about the problems of a DLA in CVL, and the IP had taken away any chance I had of of asking questions about the journey ahead, and mandated a CVL at the same time.

Had I known about the DLA, and been informed of the problems it would cause, I would not have used a CVL, I had other options that I could have chosen instead.

The minutes, it appears, were engineered to make it appear I had agreed to a CVL and that had I informed consent through the "discussions' that took place in the "board meeting".

My company's debtors owed more than my creditors (solely HMRC VAT) and I had only approached he IP because of concerns I'd be trading insolvently if one of by debtors failed in lockdown. As the DLA I had was a significant asset, (on its own twice as large as the amount owed to creditors), my feeling is that the company was nowhere near insolvent (I could have repaid the DLA immediately if required). This should have been discussed but was not.

The DLA was crystallised when the CVL began and the liquidator after years of legal bills recently won 2 years of my company's earnings plus interest.

After this I began looking on Companies House to find cases that the same IP had been involved in and in which the director also had a DLA.

I found a lot of such cases, and contacted some of the directors involved in them, and it appears that this use of fabricated minutes of a board meeting to "agree" a CVL without discussing it with the director was not confined to just my insolvency.

Does it matter that the minutes were fabricated and I only signed them because because they came with other "onboarding" docs and there was a pressure to return them. I didn't therefore agree to a CVL or to the appointment of the liquidator, or to wind up the company.

Other directors I have found are willng to swear a statement that what happened to me also happened to them and they were "forced" into their CVL without agreeing or discussing it.

My question is: is this a normal or acceptable way for an IP to start and run an insolvency?

If it isn't then what can I - and the other directors who experienced it - do ?

Are there any directors on this forum who have been through something similar.

 

[japancool]

After you realised the company was insolvent, did you make any further payments to suppliers or creditors?

 

[Venus888]

After you realised the company was insolvent, did you make any further payments to suppliers or creditors?

Yes I kept paying suppliers and creditors right to the end. There was very small amounts outstanding to other creditors besides the BBL (£5k). The biggest creditor was the BBL, but repayments were not due yet, not for a few months, and I could have asked the bank to defer even further. I wasn’t avoiding to pay back. I was extremely stressed and vulnerable as it was a big deal for me to decide what’s best for the business and myself. I had to move out of premises. The landlord wasn’t helpful…. It was all a big deal and huge amount of stress and pressure.

 

[japancool]

Yes I kept paying suppliers and creditors right to the end. There was very small amounts outstanding to other creditors besides the BBL (£5k). The biggest creditor was the BBL, but repayments were not due yet, not for a few months, and I could have asked the bank to defer even further. I wasn’t avoiding to pay back. I was extremely stressed and vulnerable as it was a big deal for me to decide what’s best for the business and myself. I had to move out of premises. The landlord wasn’t helpful…. It was all a big deal and huge amount of stress and pressure.

That's still preferential, if you didn't pay anything towards the BBL. The fact that the payments weren't due is irrelevant - you would have needed to pay all the creditors (including HMRC) on a pro-rata basis.

What about any rent due? Did you owe anything to the landlord when you moved out (including any fees for terminating the lease)?

 

[Venus888]

That's still preferential, if you didn't pay anything towards the BBL. The fact that the payments weren't due is irrelevant - you would have needed to pay all the creditors (including HMRC) on a pro-rata basis.

What about any rent due? Did you owe anything to the landlord when you moved out (including any fees for terminating the lease)?

No, didn’t owe anything to the landlord. I moved out within the lease term.

 

[Elliot Green]

And I would advise agreed in writing, before appointment, the deal regarding repayment terms, scale of write off for lump sum settlement etc.

That would not appear to be binding because:

a) any *deal* could only be agreed in writing and signed off by a Liquidator who has been appointed and acts with authority, not the *proposed* Liquidator

b) a proposed Liquidator could get themselves into difficulty with a pre Liquidation *deal*:
(i) potential professional conflict
(ii) risk of compromising the company assets with incomplete information

c) if another Liquidator was appointed nominated by a creditor instead then any such deal could constitute confetti.

 

[Daybooks]

It seems the director is saying she wasn't informed by the IP about her overdrawn directors loan before the CVL began. IMO it should be illegal for an IP not to explain in detail to a director the impact their DLA will have on them personally before the CVL begins, and the director should be given a written estimate of how much it will cost them on a piece of paper they have to sign along with the IP, that describes that alternative options open to them and why they weren't chosen.

My experience seems barely believable, but this is what actually happened, and I have all the docs to show it.

I went to an IP at the end of June 2020 and after a 10 minute phone call with the IP's managing director he recommended a CVL. I was a sole director and shareholder of my company. I had a DLA on my accounts from the previous year, but did not at the time understand it's significance if I used a CVL for insolvency,

On 2nd July 2020, I received an AML/ID onboarding email from the IP.

On 7th July 2020 I received 4 more onboarding documents from the IP in an email that said "It is imperative that this information is returned to our office as a matter of urgency from you within the next 3 working days". I hadn't completed the AML docs at this point.
1. Letter of Engagement
2. Letter of Authority
3. Pension Scheme Declaration
4. Board meeting minutes

They all seemed like run-of-the-mill onboarding docs so I signed them .

I didn't notice until much later, and after I'd signed it, that - 4. Board meeting minutes - wasn't a usual onboarding document it contained "minutes" of a "board meeting" dated 2nd July 2020 i.e. the same day I'd been sent my AML/ID checking link, and a day I definitely didn't have a board meeting.

The "minutes" of the "board meeting", stated that a director from the IP and the IP's liquidator were both "in attendance" at a meeting with me, and the "minutes" also noted:
" 1. The financial position of the Company was discussed and it was agreed that steps
be taken to place the Company into Creditors’ Voluntary Liquidation.
2. It was resolved that written resolutions would be circulated to the members of the
Company to consider and if thought fit, pass the following resolutions:
a) That the Company be wound up voluntarily;
b) That XXXX be appointed liquidator of the Company for the purposes of the voluntary winding-up.

Resolution (a) being a Special Resolution and other resolution being an Ordinary
Resolution."

There is no record of any invitations, emails, calendar entries, meeting agenda etc. being sent to the meeting's listed participants, and the IP's engagement letter hadn't even be sent at the time of this "board meeting".

TBC there was no board meeting, just minutes that, for me, prejudicially "agreed" a CVL without having the inconvenience of discussing it with me and explaining the DLA impact. So like Venus888, I was not informed about the problems of a DLA in CVL, and the IP had taken away any chance I had of of asking questions about the journey ahead, and mandated a CVL at the same time.

Had I known about the DLA, and been informed of the problems it would cause, I would not have used a CVL, I had other options that I could have chosen instead.

The minutes, it appears, were engineered to make it appear I had agreed to a CVL and that had I informed consent through the "discussions' that took place in the "board meeting".

My company's debtors owed more than my creditors (solely HMRC VAT) and I had only approached he IP because of concerns I'd be trading insolvently if one of by debtors failed in lockdown. As the DLA I had was a significant asset, (on its own twice as large as the amount owed to creditors), my feeling is that the company was nowhere near insolvent (I could have repaid the DLA immediately if required). This should have been discussed but was not.

The DLA was crystallised when the CVL began and the liquidator after years of legal bills recently won 2 years of my company's earnings plus interest.

After this I began looking on Companies House to find cases that the same IP had been involved in and in which the director also had a DLA.

I found a lot of such cases, and contacted some of the directors involved in them, and it appears that this use of fabricated minutes of a board meeting to "agree" a CVL without discussing it with the director was not confined to just my insolvency.

Does it matter that the minutes were fabricated and I only signed them because because they came with other "onboarding" docs and there was a pressure to return them. I didn't therefore agree to a CVL or to the appointment of the liquidator, or to wind up the company.

Other directors I have found are willng to swear a statement that what happened to me also happened to them and they were "forced" into their CVL without agreeing or discussing it.

My question is: is this a normal or acceptable way for an IP to start and run an insolvency?

If it isn't then what can I - and the other directors who experienced it - do ?

Are there any directors on this forum who have been through something similar.

Perhaps you should consider a separate thread. However I would trust that at face value what you describe would be unacceptable and hopefully as a minimum professional misconduct.

Your remedy should, in my view, start with allowing them to address your allegations.

 

[Daybooks]

Also, I used personal funds in the past to pay for vat, business rates and purchase of equipment which I was never reimbursed for and it was never accounted for in the company’s accounts. So the company owes me money too.

The inference of this is that you knowingly have accounts containing errors of omission.

Consequences might be paying too much corporation tax, not recovering recoverable VAT and worryingly not reconciling balance sheet accounts. By way of example if you owed £5k in VAT and paid it from your personal accounts then your Company accounts would still show it owing but HMRC wouldn’t.

Perhaps overdue but I would get a set of accounts that is right and where you can reconcile (or prove) all (and I mean all) balance sheet accounts. Your accounts are invaluable.

 

[Venus888]

The inference of this is that you knowingly have accounts containing errors of omission.

Consequences might be paying too much corporation tax, not recovering recoverable VAT and worryingly not reconciling balance sheet accounts. By way of example if you owed £5k in VAT and paid it from your personal accounts then your Company accounts would still show it owing but HMRC wouldn’t.

Perhaps overdue but I would get a set of accounts that is right and where you can reconcile (or prove) all (and I mean all) balance sheet accounts. Your accounts are invaluable.

Thank you so much for your valuable advice. Can I still go back to my accountant and ask to calculate final accounts for the business until the cessation? This never been done because the IP told me not to do that.

I have been in liquidation for 3 years now.

 

[Elliot Green]

Thank you so much for your valuable advice. Can I still go back to my accountant and ask to calculate final accounts for the business until the cessation? This never been done because the IP told me not to do that.

I have been in liquidation for 3 years now.

Determination of a director's loan account is not by production of final accounts which merely provide headline numbers for statutory reporting purposes; it is by identifying all relevant transactions that should flow through that account so the position can be calculated.

 

[Elliot Green]

Thank you so much for your valuable advice. Can I still go back to my accountant and ask to calculate final accounts for the business until the cessation? This never been done because the IP told me not to do that.

I have been in liquidation for 3 years now.

Once in Liquidation, directors lose their authority by virtue of section 103 of the Insolvency Act 1986.

 

[Venus888]

Determination of a director's loan account is not by production of final accounts which merely provide headline numbers for statutory reporting purposes; it is by identifying all relevant transactions that should flow through that account so the position can be calculated.

Okay, thank you for your clarification.

Does the fact that I had some outstanding amounts owed to me when I paid bills for the company with personal funds, and these sums were never accounted for. I have a proof of these amounts.
Also, I was entitled to statutory redundancy payment (have this in writing from Redundancy Payments Service).
The liquidator doesn’t seem to consider this in his claim.

I understand now that the IPs duty is to recover as much as possible for the creditors, but does that fact that the IP deliberately withheld crucial info and even told me false info (i.e. all debts will be written off) when he wanted me to sign up with him, doesn’t this help my situation?

Thanks so much.

 

[Elliot Green]

I can only provide general information in a caveated format so see the disclaimer at the end of this post. From there you might wish to seek further professional advice from a relevant party on the discrete facts of your case you can rely upon.

The basic principle is a director can claim on their loan account for expenses they have incurred on behalf of the company.

A liquidator is not a judge and jury over any given position. If a liquidator says to a director that they owe £X to the company, the director has something in the order of three choices:

1. Accept the liquidator's position and cough up.
2. Reject the liquidator's position and enter into an adversarial process.
3. Negotiate with the liquidator on the position, typically on the amount and ability to pay.

In the event of Number 2, then such an adversarial contest *can* culminate in Court proceedings. It is the Court that will be the ultimate decision maker if no agreement is reached.

It is not the duty of the IP to recover as much as *possible* for the creditors; it is the duty of the IP to get in, realise and distribute the company's *property*. An Overdrawn Director's Loan Accounts ("ODLA") and antecedent transactions (Transactions at an Undervalue and Preferences) are items of *property* within the meaning in Section 436 of the Insolvency Act 1986.

It is the duty of a director to know the assets of a company.

Creditor debts are not written off in a liquidation. They may go unpaid but they are not written off.

Overall if a director is asked to repay an ODLA in a liquidation they have usually not suffered a loss; they are repaying the money they owed to the company in the first place. Liquidation is not a mechanism that facilitates the writing off of an ODLA. That doesn't mean a director cannot negotiate or contest the level of the ODLA so that they discover its accurate level.

I hope this general information is helpful. Please note the following disclaimer:

The information here is not legal advice and is not to be relied upon as such. If in doubt you should take independent professional advice on the facts of your case. This guide is just a guide, for information purposes only. No liability is accepted for any reliance placed upon it.

 

[Daybooks]

Okay, thank you for your clarification.

Does the fact that I had some outstanding amounts owed to me when I paid bills for the company with personal funds, and these sums were never accounted for. I have a proof of these amounts.
Also, I was entitled to statutory redundancy payment (have this in writing from Redundancy Payments Service).
The liquidator doesn’t seem to consider this in his claim.

I understand now that the IPs duty is to recover as much as possible for the creditors, but does that fact that the IP deliberately withheld crucial info and even told me false info (i.e. all debts will be written off) when he wanted me to sign up with him, doesn’t this help my situation?

Thanks so much.

An IP knowingly relying on a set of accounts that is out of date and not seeking the current position is in my view somewhat unprofessional.

Yes you should produce a final set of accounts as at cessation date. It is imperative that you do. These will include your trial balance, profit and loss account and balance sheet. Its accuracy depends upon the proper recording of all your business transactions. I would question why the IP is not seeking it and demand an answer if they are not.

The purpose of checking or proving the balance sheet items is to obtain another verification of their accuracy. Thus if you have a fixed asset recorded then prove it exists; does the bank balance reported agree to the bank statement, do your creditor balances agree to their supplier statements, do your tax liabilities agree to what the HMRC Gateway accounts says. Similarly with a Director’s Loan Account – the director should be able to agree the balance in their personal capacity.

Thus if you loaned money to the Company to purchase assets or pay its VAT liability then independently you should be recording it as such and ensuring it agrees with the Company’s accounts. Any errors however caused should be corrected and recorded such that they correctly reflect the transactions of the Company.

You need to be comfortable that all the accounts on the final balance sheet are both understood and correct. Don’t stop until they are.

Whilst @Elliot Green is correct it that the statutory accounts don’t prove the balance in themselves they are a by-product of the final account production (trial balance) which in turn is an extract of the balances on each account. The balance on those accounts are made up the actual business transactions and directors assert they are true and fair. Thus any Director Loan Account balance is supported by the transactions.

Whilst you may lose the right of no longer being a director you don’t lose your rights as an individual.

 

[UK Contractor Accountant]

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Also, I was entitled to statutory redundancy payment (have this in writing from Redundancy Payments Service).

Have you put in a claim to the RPO?

 

[Venus888]

---

Have you put in a claim to the RPO?

Yes, I have, I was eligible for £7,000. I have everything in writing from them.

 

[Venus888]

An IP knowingly relying on a set of accounts that is out of date and not seeking the current position is in my view somewhat unprofessional.

Yes you should produce a final set of accounts as at cessation date. It is imperative that you do. These will include your trial balance, profit and loss account and balance sheet. Its accuracy depends upon the proper recording of all your business transactions. I would question why the IP is not seeking it and demand an answer if they are not.

The purpose of checking or proving the balance sheet items is to obtain another verification of their accuracy. Thus if you have a fixed asset recorded then prove it exists; does the bank balance reported agree to the bank statement, do your creditor balances agree to their supplier statements, do your tax liabilities agree to what the HMRC Gateway accounts says. Similarly with a Director’s Loan Account – the director should be able to agree the balance in their personal capacity.

Thus if you loaned money to the Company to purchase assets or pay its VAT liability then independently you should be recording it as such and ensuring it agrees with the Company’s accounts. Any errors however caused should be corrected and recorded such that they correctly reflect the transactions of the Company.

You need to be comfortable that all the accounts on the final balance sheet are both understood and correct. Don’t stop until they are.

Whilst @Elliot Green is correct it that the statutory accounts don’t prove the balance in themselves they are a by-product of the final account production (trial balance) which in turn is an extract of the balances on each account. The balance on those accounts are made up the actual business transactions and directors assert they are true and fair. Thus any Director Loan Account balance is supported by the transactions.

Whilst you may lose the right of no longer being a director you don’t lose your rights as an individual.

Thank you so much for your reply.

This is exactly which caused the problems for me, because accounts where not done, the liquidator asked me to calculate my DLA just by going through the bank statements. I am not an accountant and didn’t know anything about how the DLA is calculated. For example I didn’t have information about my dividends which where credited to my DLA. I was completely misled by the IP, given false information (like all debts will be written off) at the beginning. Then 6 months later he started sending me letters pursing me for large amounts of money for my DLA. I find this process so unfair and unjust.

 

[Elliot Green]

Thank you so much for your reply.

This is exactly which caused the problems for me, because accounts where not done, the liquidator asked me to calculate my DLA just by going through the bank statements. I am not an accountant and didn’t know anything about how the DLA is calculated. For example I didn’t have information about my dividends which where credited to my DLA. I was completely misled by the IP, given false information (like all debts will be written off) at the beginning. Then 6 months later he started sending me letters pursing me for large amounts of money for my DLA. I find this process so unfair and unjust.

Whilst directors are not required to be accountants they are taken to know the facts. It is *usually* going to be an uphill struggle for a director to say they don't have information on monies they have received from a company because their own personal records and bank statements *should* typically include such information.