Insolvency, strike of vs CVL benefits/risk?

Discussion in 'Insolvency' started by ripgd, Apr 14, 2020.

  1. ripgd

    ripgd UKBF Newcomer Free Member

    2 0
    Hi all,

    What can I say, I'm heartbroken, and I messed up. This company was the biggest mistake of my life having invested big, to have never taken a penny back from it and now be in this situation.

    I say this only to highlight I have many regrets, all of which I take accountability for, but I'm looking for support in the best way to leave this behind.

    The company is insolvent, and I need to work out the best way to close it down to stop future come backs. What I mean, is one huge mistake I made was essentially forgetting to register deposits we took, which legally we should have. To be clear, the deposits are still present and will be repaid/registered before any action is taken BUT legally the deposit holders can claim compensation of 3x their original amount, up to 6 years after the event, for this failing.. regardless of them getting their deposit back.

    Obviously I'd hope that given they will be getting them back, it won't be quite the issue I'm making it out to be but I'm seeing one instance already this might not be true. This leads to my question of wanting to close this company down properly and walk away forever without fear of it coming back to haunt me.

    When comparing just striking off, vs Liquidation (preferably DIY using the Spongebob approach) does one have any benefit over the other in terms of being able to have someone object/reopen the company in the future by force, particularly when it would be in this instance of compensation rather than debt?

    For clarity we're not talking huge figures relative to others, but still significant enough to me. Company has no assets, has circa 7k in the bank today with circa 13k liabilities, of which circa 6k are said deposits.

    Thanks for your help.
     
    Posted: Apr 14, 2020 By: ripgd Member since: Apr 14, 2020
    #1
  2. Scalloway

    Scalloway UKBF Legend Free Member

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    If the company has £7k in the bank then the company should look at appointing an insolvency practicioner to ensure everything is done correctly.
     
    Posted: Apr 14, 2020 By: Scalloway Member since: Jun 6, 2010
    #2
  3. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    Unless the £6k of deposits are in a separate trust bank account then the ordinary dissolution would not seem appropriate to your Company as there are sufficient funds to liquidate either via the court process or voluntarily.

    To answer your question if the Company is somehow struck off then there cannot be an investigation into the directors' conduct and claims brought against you personally by the Liquidator for any misconduct.

    If the Company is liquidated, The Insolvency Services are highly unlikely to be interested in a potential claim of misfeasance of £6k.
     
    Posted: Apr 15, 2020 By: Lisa Thomas Member since: Apr 20, 2015
    #3
  4. Ian J

    Ian J Factoring Specialist Full Member - Verified Business

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    The problem with that approach is that the liquidator will gobble up the £7,000 as their fees and the poor people that paid deposits will lose out
     
    Posted: Apr 15, 2020 By: Ian J Member since: Nov 6, 2004
    #4
  5. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    That's one reason why the deposits should have been protected.
     
    Posted: Apr 15, 2020 By: Lisa Thomas Member since: Apr 20, 2015
    #5
  6. mattk

    mattk UKBF Newcomer Free Member

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    Presumably, they should have been placed in a Government-approved scheme (I assume we're talking short term tenancy deposits due to the 3x compensation)?
     
    Posted: Apr 15, 2020 By: mattk Member since: Dec 5, 2005
    #6
  7. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    I believe that tenancy deposits should be held with one of the government protected schemes and general deposits/payments in advance should be held in a separate bank account that the Bank has confirmed is held on trust.
     
    Posted: Apr 15, 2020 By: Lisa Thomas Member since: Apr 20, 2015
    #7
  8. ripgd

    ripgd UKBF Newcomer Free Member

    2 0
    Thank you all for your comments.

    @Lisa Thomas does it make any difference if the deposits are accounted for in a different account, ie separated into a deposit liability account? This is effectively what has happened, deposit came in, and allocated in Xero into a deposit holding account, but in the physical sense some funds never left the primary business account.

    The turmoil I face is the spongebob method could avoid most the need for a liquidation based on current debts and their individual size, and support the return of the individual deposits... However, if I've understood correctly, SB could keep current debtors at bay and make them walk away, but doesn't sound like it would stem off new cases claiming for compensation (given tenants have the right to claim this for up to 6 years afterwards) during least the 3 months non trading period before strike off. The claims at a 3x multiplier could be between £900, to £2,500 each- would these be enough to warrant a legal firm pursuing the company to be restored from the strike off?
     
    Posted: Apr 15, 2020 By: ripgd Member since: Apr 14, 2020
    #8
  9. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    No - they needed to have been physically held in a separate trust account - how you have labelled them on Xero makes no difference I'm afraid.

    However it's highly unlikely that any creditor is going to pay to restore the Company and possibly then pay more funds to start recovery action to claim compensation, especially if you have paid them their capital deposits back.

    What are the remaining £7k of creditors?
     
    Posted: Apr 16, 2020 By: Lisa Thomas Member since: Apr 20, 2015
    #9
  10. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

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    If you paid back the deposits, could you then afford a IP services from personal savings etc to close down the company, you may be able to negotiate a fixed fee if you present the full details to the ip
     
    Posted: Apr 16, 2020 By: Chris Ashdown Member since: Dec 7, 2003
    #10
  11. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    I think there would be little benefit in doing that in the circumstances unless there are employees who would benefit by claiming funds from the Redundancy Payments Office scheme..
     
    Posted: Apr 16, 2020 By: Lisa Thomas Member since: Apr 20, 2015
    #11
  12. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

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    Only suggested it as he seems to feel a moral duty to his deposit holders, which seems rather rare these days
     
    Posted: Apr 17, 2020 By: Chris Ashdown Member since: Dec 7, 2003
    #12
  13. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    I think OP either pays the customers their monies back with the funds in hand and then tries to dissolve the Company, or instead uses the funds to Liquidate.

    There is little point in paying them back and then having to pay personally to Liquidate.
     
    Posted: Apr 17, 2020 By: Lisa Thomas Member since: Apr 20, 2015
    #13
  14. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

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    I can see your point Lisa and would agree 100% for company debts, but these were deposits which should have been in a seperate account and guaranteed and were made in good faith that they were safe for refunding at a later date
     
    Posted: Apr 18, 2020 By: Chris Ashdown Member since: Dec 7, 2003
    #14
  15. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

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    For clarify I'm not suggesting OP carries out option 1 but I suspect that they will.
     
    Posted: Apr 20, 2020 By: Lisa Thomas Member since: Apr 20, 2015
    #15