Debt Collection after Cessation of Trade

[Zumanji]

Hi folks - you've all been so helpful on here so far, so thank you for all your input.

Again, to put you in the picture, I took the decision to cease trading on one of our companies due to insolvency. We had a lot of product that we had manufactured for clients in storage, which remained in storage until now.

I have finally managed to find someone to hold the stock and distribute it for ex-clients. It's an ex-competitor and they've been very good about taking it on and holding and distributing.

There are a couple of clients however who still owe money to the old limited company (which is due to be struck off in June). Is it OK for me to carry on trying to collect debts from them despite the fact that we have ceased trading? The guys who will be holding onto the stock have agreed to help and not dispatch for clients until debts are cleared, as they agree with us that our creditors must be paid if at all possible.

Is it legal/proper for us to continue doing this despite the cessation of trading? And what about after the company is struck off?

Thanks everyone

 

[kulture]

It is not legal or proper to do this. Either the company has ceased trading or not. That said there has to be a straightforward way to assign the debts and stock to the new company so that it can be don in a legal and proper way.

 

[Zumanji]

It is not legal or proper to do this. Either the company has ceased trading or not. That said there has to be a straightforward way to assign the debts and stock to the new company so that it can be don in a legal and proper way.

But in the case of a formal insolvency, the IP would try to collect debts in order to pay creditors... do I not have this duty to creditors? Surely as Director it is one of my only remaining duties?!

 

[maxine]

Yes it's your duty to get as much money in as possible for the creditors. Perhaps the thread was mis-read as sometimes people want to pocket payments themselves or direct to a new company without it going towards creditors.

Good luck

 

[arcon5]

I could be wrong, but if a company is struck off and therefore no longer registered with companieshouse, how can it be legal to then continue collecting payments in the name of said company?

Surely any debt collection should take case BEFORE the legal entity seizes to exist?.... (ie before being struck off)

 

[Legalbeagle]

If a company has ceased trading then it cannot contract for new trade, but it is completely right and proper for it to continue to collect on outstanding debt. You should certainly still pursue those invoices prior to the strike off.

If you make a recovery, then these funds should be used to discharge creditors, on an equal basis to their outstanding debt, (to avoid allegations of preference to one creditor or other).

If money is tight, then there are solicitors who do recoveries on a CFA (a no win no fee).

You should consider that your duties as a director are to act in the best interest of the company, and should formal insolvency follow rather than a strike off, your actions in collecting the debt would be to your credit. Alan will be in a better position to advise on this point.

 

[Alan R Price]

No disrespect to kulture but there is no reason why a company that has ceased trading should not continue collecting the money due to it. It is correct that the directors' duties remain and they must act in its best interests until it is struck off (i.e. ceases to exist). Once striking off has taken place then of course the directors' rights/responsibilities terminate.

I do however agree with kulture's suggestion that the debts etc. could be assigned to "newco" (for proper consideration, of course!).