Directors Loan Account Out of Hand

Discussion in 'Insolvency' started by Dion Mellows, Apr 15, 2019.

  1. Dion Mellows

    Dion Mellows UKBF Newcomer Free Member

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    Dear All,

    I am at a complete loss of what to do. I have a company that has been running for 7 years now and we are perpetually swimming against the current. My business apparently makes a profit of about £25k/annum however we are always at the limit of the overdraft and the debts are now mounting.
    I moved accountants 14months ago and things have got worse since then.
    I have just been informed that my DLA account is now running at £60k (I used to get a quarterly warning with a dividend issued to clear this)
    I have the following company debts:
    £10k overdraft
    £6k credit cards
    £25k loan
    £5k to other suppliers

    I literally never have a pot to P**s in and not sure where the money is going or how its got to this point, I accept full responsibility for this. At this point I am thinking to just fold the company however, I have never done this before and not sure what I can do. I owe HMRC some money in past Tax credits of £5k hence the request to the accountant to see what my personal figures are with the company. The company has zero assets, the computer on an a lease agreement and thats it.

    Can anybody advise on what I should do?
     
    Posted: Apr 15, 2019 By: Dion Mellows Member since: Apr 15, 2019
    #1
  2. Mr D

    Mr D UKBF Legend Free Member

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    Get professional advice from an insolvency practitioner. There's a few good ones on the forums or do an internet search and will find some, whether they are good....
    The ones on here you can read the kind of advice they give at least.

    That overdrawn directors loan account is a problem.

    The company spending - go through the bank account with a fine tooth comb and see what is going out versus coming in. £25k profit would expect some capacity to build up money.
    That is presuming the £25k profit is correct.

    Any of those debts you listed have a personal guarantee?
     
    Posted: Apr 15, 2019 By: Mr D Member since: Feb 12, 2017
    #2
  3. Dion Mellows

    Dion Mellows UKBF Newcomer Free Member

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    Hi Mr D.
    Is that where I need to start looking? I am completely fed up with always playing catchup and never having any job security. I work 14hours/day 6 days/week and rarely see my kids. I used to get advice on the DLA however since changing accountants I only found out today its that high. Thye said I could raise a dividend however there is no money in the company and I do not have any money to pay the tax. I had to take a £1k loan the other day to pay the mortgage. Im sure the overdraft is a personal guarantee and the Loan is aswell....... I am completely up a creek without a paddle...
     
    Posted: Apr 15, 2019 By: Dion Mellows Member since: Apr 15, 2019
    #3
  4. billybob99

    billybob99 UKBF Regular Free Member

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    By the looks of your website, you're the Managing Director, a smart guy that knows his industry.

    How on earth did you let it come to this. I would be worried about the stuff with a personal guarantee.

    Don't you have a pipeline of work/clients/money coming in.
     
    Posted: Apr 15, 2019 By: billybob99 Member since: Apr 23, 2013
    #4
  5. Mr D

    Mr D UKBF Legend Free Member

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    Posted: Apr 15, 2019 By: Mr D Member since: Feb 12, 2017
    #5
  6. Scalloway

    Scalloway UKBF Legend Free Member

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    The declaration of a dividend does not depend on cash in the bank, it depends on profits being available. Presumably the accountant is happy that profits are available.

    How much do your customers owe your company?
     
    Posted: Apr 15, 2019 By: Scalloway Member since: Jun 6, 2010
    #6
  7. Dion Mellows

    Dion Mellows UKBF Newcomer Free Member

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    Well thank you for the compliments. I do know the industry and have worked my absolute ass off for no personal gain, hence looking to simplify life.
     
    Posted: Apr 15, 2019 By: Dion Mellows Member since: Apr 15, 2019
    #7
  8. Dion Mellows

    Dion Mellows UKBF Newcomer Free Member

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    Thanks, Mr D. Personal side can be fixed relatively easily with a payment plan to HMRC. I have reduced this debt with them from Circa £20k to now circa £5k. So this side is fine its just the company side now with the potential tax liability of approx £60k in DLA which got out of hand since moving accountants. My old ones sorted all this and the new ones were employed to do this and more, however nothing has happened and I am now in this situation.
     
    Posted: Apr 15, 2019 By: Dion Mellows Member since: Apr 15, 2019
    #8
  9. Dion Mellows

    Dion Mellows UKBF Newcomer Free Member

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    Currently owed about £6k
     
    Posted: Apr 15, 2019 By: Dion Mellows Member since: Apr 15, 2019
    #9
  10. Mr D

    Mr D UKBF Legend Free Member

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    Personal side includes all company debts where you have a personal guarantee. If business ceases paying the debts (as it must when it ceases trading) then you become liable for those.
    The other company debts that don't have a personal guarantee remain belonging to the company, not you.

    However the problem of the personal guarantee on debts cannot be a factor in deciding whether the business is insolvent and must cease trading.

    There may be other options. Hence professional advice from an insolvency practitioner needed.
     
    Posted: Apr 15, 2019 By: Mr D Member since: Feb 12, 2017
    #10
  11. Dion Mellows

    Dion Mellows UKBF Newcomer Free Member

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    Thanks Mr D. I will discuss with my accountants and then seek professional advice. There isnt a penny spare for Insolvency however, I shall ask the question. We are up to date with all VAT and Corp tax etc.
     
    Posted: Apr 15, 2019 By: Dion Mellows Member since: Apr 15, 2019
    #11
  12. Gavin Bates

    Gavin Bates UKBF Enthusiast Free Member

    577 115
    Hi

    I often post on here and am always happy to have a chat if helps.

    Initial meetings are free of charge and confidential.

    Kind regards

    Gavin
     
    Posted: Apr 15, 2019 By: Gavin Bates Member since: May 9, 2016
    #12
  13. Dion Mellows

    Dion Mellows UKBF Newcomer Free Member

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    Hi Gavin,

    Thanks for your message. I just got the message today from my accountants stating I now owe £60k in DLA along with the other debts specified and I am now looking at exit strategies. I just dont want to be bankrupt at the end of the process or to keep working solid for the next few years and miss my kids childhood as I am always working.
     
    Posted: Apr 15, 2019 By: Dion Mellows Member since: Apr 15, 2019
    #13
  14. Mr D

    Mr D UKBF Legend Free Member

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    The spongebob plan is for those businesses who cannot afford to pay for insolvency.
    However that would cost you the business and knock on effects of debts. And any creditor could wind the business up, rather than you simply dissolving it.

    There may be other options an IP can help with. For example a CVA whereby your creditors agree a repayment plan - no clue whether it would suit or not, and may be other options.

    It sounds like carrying on as you are is not an option so at least something needs to change.
     
    Posted: Apr 15, 2019 By: Mr D Member since: Feb 12, 2017
    #14
  15. Pendulum

    Pendulum UKBF Contributor Free Member

    40 3
    You are getting a lot of advice about how to manage a type of situation, but what have you done so far to establish that this is actually the situation you are in? Over what period of time do they think you accumulated the DLA?

    You moved from one accountant to another, and that is when things changed it seems. You are now being told you are in this situation by the new accountant. What if they are incompetent or dishonest? Did they show you anything to demonstrate their take on the state of your company, or just relay it verbally?

    Where has all the turnover been going? Have you tried checking whether the accountant is correct? Do you live a lavish lifestyle? Is there any other household income? Did the £1k you borrowed cover part or all of the mortgage payment?

    Do you know how much money has come in over the last couple of years, and how much has gone out? In your current position I would get a pen and some paper, and start trying to figure out how you have supposedly run up a £60k personal debt to your own company without knowing about it! Do you maintain a stables or run a speedboat in the spare time you don't have? Stay at the Four Seasons often?
     
    Posted: Apr 16, 2019 By: Pendulum Member since: Mar 31, 2013
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  16. mattk

    mattk UKBF Newcomer Free Member

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    Your debts don't sound insurmountable to me. Have you worked out whether you have a viable business before you throw in the towel?

    You say the company is making £25k profit, is this after you have drawn a salary or are you effectively working for free? If you're drawing a decent salary AND making a small profit is there a way you want repay your debts and continue to trade profitably?
     
    Posted: Apr 16, 2019 By: mattk Member since: Dec 5, 2005
    #16
  17. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    You cannot vote a dividend to write the DLA off - the Company is insolvent so this will be illegal.

    You really need to speak to an IP.

    It sounds like an insolvency procedure is necessary.

    Depending on your personal financial circumstances you might be able to do a deal to pay some/all of the DLA back in installments.
     
    Posted: Apr 16, 2019 By: Lisa Thomas Member since: Apr 20, 2015
    #17
  18. Dion Mellows

    Dion Mellows UKBF Newcomer Free Member

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    If I could manage to pay the companies debts to clear the loan and ensure HMRC are up to date could I then just fold the company? The £60k in DLA is looking the scariest as I just will not be able to clear this anytime in the foreseeable future. I have a projected £30k coming in over the next few months which could clear the debts. What would the implications of my DLA account be in this scenario??
     
    Posted: Apr 16, 2019 By: Dion Mellows Member since: Apr 15, 2019
    #18
  19. Dion Mellows

    Dion Mellows UKBF Newcomer Free Member

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    Thats what I was thinking. Not the best initial advice from the accountants. They said just issue a £60k dividend and poof everything is fixed however I cannot see it this way. I am still up to date with all payments however they do bounce more often than not.
     
    Posted: Apr 16, 2019 By: Dion Mellows Member since: Apr 15, 2019
    #19
  20. Dion Mellows

    Dion Mellows UKBF Newcomer Free Member

    12 0
    HI Mattik, This is after everything. There were no salaries paid last year as I was expecting as usual to have the accountants tell me we needed to issue a dividend etc (I get this is my fault however 12 months can fly by). The business is still viable however it needs a different approach. Lots of small clients which are variable in terms of value. Its the DLA which is scarying me, either way I see this playing out I see bankruptcy from my side...
     
    Posted: Apr 16, 2019 By: Dion Mellows Member since: Apr 15, 2019
    #20