Liquidation of a LTD company. Best way? Assets

[HeadScratching]

Hi

I'll keep this short but basically due to poor business management and a shocking online accounting firm, we have a LTD company with 200k debt and HMRC aren't offering time to pay the VAT.

It's over 100k VAT, BBL and PAY and Corporation Tax.

Our new decent accountant uncovered how bad it was. We spent 6 months redoing paperwork etc and found out all of this. There is an overdrawn DL account of over 50k which is frustrating as we dealt with cash for a lot of my business for years including renting a yard etc but can't prove where the money went so it's DL.

Also I was just transferring me/the wife money when we needed it, assuming the accountant would put it down as wages but as has been pointed out, that isn't the way to do it. Now I know this, I'm questioning why an accounting firm didn't flag it for 2 years!

Anyway, going forward, the business has assets. Not loads but assets.

The IP I have spoken to seems to think we will pay little for these but has said we can sell them now.

I'm not sure what to do, I can start selling them but am wondering if it's better leaving them to the IP.

Cars for example, my wife (not a director) loaned 10k into the business and I'm wondering whether just to write an invoice for 2 vehicles which would be JUST under what WeBuyAnyCar would offer.

I'd love any experience with this all.

The other thing is we may be able to look into a CVA I'd presume.

The stress is literally killing me, I haven't slept properly in weeks and just need to put this to bed. I'm worried I won't get insurance after with a new company but need to make some calls I guess.

I sat down over the weekend and put all the transactions of the BBL down. One was a vehicle purchase but we still have it and it is still registered into the company. However it was purchased for 17k 2 or 3 years ago and currently is probably worth 3-4 absolute tops. Not sure it will raise a red flag but the engine went bang and it's stripped out til we could get the time to sort it.

What other implications in the real world does liquidating have?

Also has anyone got any experience of a CVA.

I'm lucky I now have an awesome accountant and genuinely don't feel we will be in this mess again but a fresh start would be great just not sure if the cons outweigh the pros.

The IP said the DL won't be written off fully but most will because I don't own a property and don't have a lot personally!

 

[Lee Green]

If you were already speaking to an IP then id hope that they could also talk to you about the pros and cons of a potential CVA. The CVA landscape has been somewhat compromised by HMRC returning to preferential status though and so there are less of these being proposed with now (only 19 CVAs in May - most recent stats).

You are the director and so you can sell assets if you want prior to an insolvency. However, if you are going to put the company into liquidation then it usually makes sense for the IP to handle that. It avoids you potentially disposing of anything at an undervalue or to a connect party, which might get reviewed at a later stage. Having just read your note back, you seem to suggest about selling the cars to your wife and offsetting against a loan. That is a perfect example of a preference, which could land you in trouble.

If there are assets which only have a nominal value then i guess these might be fine to dispose of pre liquidation. All disposals would usually need to be reviewed once the liquidation commences though.

As regards the DLA, the IP would need to attempt to recover in full. However, if your personal circumstances means that you are not able to repay in full then they will of course need to accept some sort of payment proposal. We generally have to take commercial decisions when pursuing any asset and that can mean not recovering the asset in full.

Other implications of a liquidation. There will be an investigation into your conduct. Directors can be disqualified for a period of 2-15 years. If you have given any personal guarantees, these would get called in following an insolvency event. If you are involved with future companies and looking to obtain credit, you may need to disclose that you were a director of a company that entered into a formal insolvency process.

I or any of the other IPs on here would no doubt be willing to discuss over the phone for a second opinion about the company and considerations of a CVA etc.

 

[ChrisCallaghan]

I was about to comment, but I see @Lee Green has already provided a helpful summary.

Should you need advice about the viability of a CVA, I'm happy to throw my hat in, though I'm sure Lee will be able to assist.

 

[Daybooks]

Sorry to hear about your predicament.

Unfortunately some accountants do bring our profession down at times. Accounting is the language of businesses but alas many are not fluent in it.

The profit and loss accounts and balance sheets also tell a story but only if they are heard. I sense that they are loud and clear now. Remember your purchases are somebody’s sales so your rental payments should be appearing in their accounts. Therefore do not give up just yet on proving those payments. Invoices or statements, rental agreements, proof of occupancy in terms of utility bills could all assist. Unless it was cash for an unhealthy reason the supplier should be happy to oblige…

Good luck.

 

[UK Contractor Accountant]

Cars for example, my wife (not a director) loaned 10k into the business and I'm wondering whether just to write an invoice for 2 vehicles

Where these cars actually recorded as company assets and P11D taxable benefits declared for private use?

Might be the case that the Accountant put these down as DLA payments.

 

[HeadScratching]

Where these cars actually recorded as company assets and P11D taxable benefits declared for private use?

Might be the case that the Accountant put these down as DLA payments.

Thanks.

No but they were cars to sell on. One has been used in the company but not now.

 

[HeadScratching]

Sorry to hear about your predicament.

Unfortunately some accountants do bring our profession down at times. Accounting is the language of businesses but alas many are not fluent in it.

The profit and loss accounts and balance sheets also tell a story but only if they are heard. I sense that they are loud and clear now. Remember your purchases are somebody’s sales so your rental payments should be appearing in their accounts. Therefore do not give up just yet on proving those payments. Invoices or statements, rental agreements, proof of occupancy in terms of utility bills could all assist. Unless it was cash for an unhealthy reason the supplier should be happy to oblige…

Good luck.

Cash for rent. Assumed not claimed for but always told it was.

Not the type to write a receipt.


Well away from them now and never again.

 

[HeadScratching]

I was about to comment, but I see @Lee Green has already provided a helpful summary.

Should you need advice about the viability of a CVA, I'm happy to throw my hat in, though I'm sure Lee will be able to assist.

Thank you.

I feel I am taking the mick speaking to loads without committing!

 

[HeadScratching]

If you were already speaking to an IP then id hope that they could also talk to you about the pros and cons of a potential CVA. The CVA landscape has been somewhat compromised by HMRC returning to preferential status though and so there are less of these being proposed with now (only 19 CVAs in May - most recent stats).

You are the director and so you can sell assets if you want prior to an insolvency. However, if you are going to put the company into liquidation then it usually makes sense for the IP to handle that. It avoids you potentially disposing of anything at an undervalue or to a connect party, which might get reviewed at a later stage. Having just read your note back, you seem to suggest about selling the cars to your wife and offsetting against a loan. That is a perfect example of a preference, which could land you in trouble.

If there are assets which only have a nominal value then i guess these might be fine to dispose of pre liquidation. All disposals would usually need to be reviewed once the liquidation commences though.

As regards the DLA, the IP would need to attempt to recover in full. However, if your personal circumstances means that you are not able to repay in full then they will of course need to accept some sort of payment proposal. We generally have to take commercial decisions when pursuing any asset and that can mean not recovering the asset in full.

Other implications of a liquidation. There will be an investigation into your conduct. Directors can be disqualified for a period of 2-15 years. If you have given any personal guarantees, these would get called in following an insolvency event. If you are involved with future companies and looking to obtain credit, you may need to disclose that you were a director of a company that entered into a formal insolvency process.

I or any of the other IPs on here would no doubt be willing to discuss over the phone for a second opinion about the company and considerations of a CVA etc.

Thank you.

Fair enough.

It was fairly recent loan so thought I could put it down as a sale.

Thanks.

What do they look into in terms on conduct?

I've been horrendous at running a company, I'm not going to lie. Not on purpose just so much I did not know.

Having a proper, decent accountant for the last year has taught me more than 10 years in having my own business!

The thing is, what is being insolvent?

We are still trading, we aren't putting anyone in a worse position, the VAT, tax, suppliers, rent, utilities all gets put into little saving pockets in Starling every time a bill gets paid.

The cooperation tax, PAYE and BBL is all getting paid.

Technically if VAT let us do a payment plan that is affordable then I could carry on.

Maybe this shouldn't be my decision but if they make me personally bankrupt or if I can't get insurance then I don't really have a choice but to carry on anyway.

Selling the non needed assets off could pay a big chunk of VAT and may get us back on track.

It's all a big catch 22.

 

[Gyumri]

I think this one of those occasions where it would be less stressful for a liquidator to pick over the bones of the company so that you can move on with a fresh start.

A liquidator is bound to want to seek a repayment of some amount to reduce the DLA but it seems that is all they could do, since you have no assets.

HMRC will catch a cold and the liquidator might frown on the way you have run the company but I would agree a fixed fee to get a liquidator to wind up the company in an orderly fashion so that you can then make a fresh start having learnt from your mistakes - which are the best university.

it's not worth fretting but much more important to now start afresh with a new company.

 

[UK Contractor Accountant]

Thanks.

No but they were cars to sell on. One has been used in the company but not now.

Unless you are vehicle dealers I think any appointed liquidator will view these as cars bought for personal use of the Directors/Shareholders. Might be viewed as abuse of the BBL funds.

 

[Lee Green]

Thank you.

Fair enough.

It was fairly recent loan so thought I could put it down as a sale.

Thanks.

What do they look into in terms on conduct?

I've been horrendous at running a company, I'm not going to lie. Not on purpose just so much I did not know.

Having a proper, decent accountant for the last year has taught me more than 10 years in having my own business!

The thing is, what is being insolvent?

We are still trading, we aren't putting anyone in a worse position, the VAT, tax, suppliers, rent, utilities all gets put into little saving pockets in Starling every time a bill gets paid.

The cooperation tax, PAYE and BBL is all getting paid.

Technically if VAT let us do a payment plan that is affordable then I could carry on.

Maybe this shouldn't be my decision but if they make me personally bankrupt or if I can't get insurance then I don't really have a choice but to carry on anyway.

Selling the non needed assets off could pay a big chunk of VAT and may get us back on track.

It's all a big catch 22.

There comes a point where it is difficult to respond to various questions without writing a novel. So ill try to keep it brief.

That said, I am somewhat concerned by some of your questions though, as i would have thought the IPs you have already spoken to would have dealt with these matters.

Certainly they should have articulated what is meant by insolvency. Put simply, the inability to pay your debts. Insolvency is usually proved by failing one of the two key tests.

Cashflow - unable to pay your debts as and when they fall due
Balance sheet - your liabilities, including contingent and prospective, are greater than the value of your assets.

All matters of conduct are reviewed by a Liquidator. In this day and age there is a clear focus on reviewing use of any COVID support schemes for misuse.

Other matters that generally get looked at (this is not exhaustive): Appropriateness of the sale of any assets in the lead up to insolvency. Payments to connected parties. Director loan account use. general misappropriation of money. Continued trading whilst apparent knowledge of insolvency.

You referencing being made bankrupt. Remember, you cannot be made bankrupt for company debts.
Unless, you have given a Personal guarantee, have an outstanding DLA or are the subject of another claim by the liquidator etc.

 

[Daybooks]

Cash for rent. Assumed not claimed for but always told it was.

Not the type to write a receipt.


Well away from them now and never again.

Whether it was claimed would be a matter of fact that your new accountant can get to the bottom of for you.

You may have unclaimed VAT on those rental payments too. Don’t lose out just because you may wish to rid yourself of dealings with a previous supplier who may not have been acting completely above board.

 

[HeadScratching]

Unless you are vehicle dealers I think any appointed liquidator will view these as cars bought for personal use of the Directors/Shareholders. Might be viewed as abuse of the BBL funds.

Part of the company is vehicle sales.

 

[HeadScratching]

Whether it was claimed would be a matter of fact that your new accountant can get to the bottom of for you.

You may have unclaimed VAT on those rental payments too. Don’t lose out just because you may wish to rid yourself of dealings with a previous supplier who may not have been acting completely above board.

Cheers

There was no VAT on them

 

[HeadScratching]

There comes a point where it is difficult to respond to various questions without writing a novel. So ill try to keep it brief.

That said, I am somewhat concerned by some of your questions though, as i would have thought the IPs you have already spoken to would have dealt with these matters.

Certainly they should have articulated what is meant by insolvency. Put simply, the inability to pay your debts. Insolvency is usually proved by failing one of the two key tests.

Cashflow - unable to pay your debts as and when they fall due
Balance sheet - your liabilities, including contingent and prospective, are greater than the value of your assets.

All matters of conduct are reviewed by a Liquidator. In this day and age there is a clear focus on reviewing use of any COVID support schemes for misuse.

Other matters that generally get looked at (this is not exhaustive): Appropriateness of the sale of any assets in the lead up to insolvency. Payments to connected parties. Director loan account use. general misappropriation of money. Continued trading whilst apparent knowledge of insolvency.

You referencing being made bankrupt. Remember, you cannot be made bankrupt for company debts.
Unless, you have given a Personal guarantee, have an outstanding DLA or are the subject of another claim by the liquidator etc.

We have only had a brief chat but maybe I should phone some more.

I just feel bad taking people's time

 

[Lisa Thomas]

Hello

Just to confuse you with one more opinion (!) I have answered your points below:

Cars for example, my wife (not a director) loaned 10k into the business and I'm wondering whether just to write an invoice for 2 vehicles which would be JUST under what WeBuyAnyCar would offer.

She would have to physically pay for them, rather than you gifting her the cars in exchange for her debt otherwise the liquidator could pursue you for a 'transaction at an undervalue'

If it's her intention to purchase the vehicle/s then best to do this either via the IP or via their recommended agent.

The other thing is we may be able to look into a CVA I'd presume.

Have you produced cash flow forecasts that can show the company will be profitable? Suspect HMRC may well be the issue here. If they are the largest creditor they will have the swaying vote in a CVA. If they have rejected a TTP that attitude may continue to any CVA proposal, although it would be a different section of HMRC that would make the decision.

You might be better off considering a phoenix liquidation instead.

What other implications in the real world does liquidating have?

• Any personal guarantees given to creditors will likely be called in.
• If the liquidator uncovers misconduct you can be pursued and held personally liable for repayment, a fine and/or disqualification

The IP said the DL won't be written off fully but most will because I don't own a property and don't have a lot personally!

Get their agreement to what you will repay IN WRITING!

Many of my YouTube video's cover the queries raised here. The link is in my signature below.

Best of luck going forward.

 

[The Resolver]

Let me throw in another matter for consideration.

The negligence would have to be significant(not just poor advice) but from what you write, the company (and possibly yourself personally for its impact on you) may have a claim for professional negligence. That would require a review of all communications with the former accountant. It is only in extreme cases that one could proceed on that basis but the first step would be to ask the accountants for details of their professional negligence insurers (which they are bound to provide) and to submit a claim. Firstly they may respond by being prepared to make an offer to settle any claim rather than cede control of the outcome to their insuerers,.together with the consequences it may have for them (increased premiums/impact on other cases)

Often for the insurers its better to make some low ball offer at an early stage than to incur the cost of fighting in court.

It might be best to ask your current accountants to be specific as to what was done/not done. They are not of course independent so that you would need a full expert report from someone prepared to act as expert witness afer giving them the report form the current accountants. I am not advising on court action but that steop that could produce some level of payment that might make a difference to your situation. Happy to advise further in private.

 

[HeadScratching]

Let me throw in another matter for consideration.

The negligence would have to be significant(not just poor advice) but from what you write, the company (and possibly yourself personally for its impact on you) may have a claim for professional negligence. That would require a review of all communications with the former accountant. It is only in extreme cases that one could proceed on that basis but the first step would be to ask the accountants for details of their professional negligence insurers (which they are bound to provide) and to submit a claim. Firstly they may respond by being prepared to make an offer to settle any claim rather than cede control of the outcome to their insuerers,.together with the consequences it may have for them (increased premiums/impact on other cases)

Often for the insurers its better to make some low ball offer at an early stage than to incur the cost of fighting in court.

It might be best to ask your current accountants to be specific as to what was done/not done. They are not of course independent so that you would need a full expert report from someone prepared to act as expert witness afer giving them the report form the current accountants. I am not advising on court action but that steop that could produce some level of payment that might make a difference to your situation. Happy to advise further in private.

Thank you.

I did wonder that. I have to admit I cannot deal with the stress of a court battle.

I have wanted to sue, my accountant reckons I should but it's not something I can mentally deal with.

Your option may be a good one.

If there is something worth pursuing, I do have a family friend who would do it in return for a cut of the payout which is fair enough.

I must add he isn't a solicitor but does have one and because of his profession has dealt with many court cases over the years for his and his family businesses.

 

[HeadScratching]

Hello

Just to confuse you with one more opinion (!) I have answered your points below:

Cars for example, my wife (not a director) loaned 10k into the business and I'm wondering whether just to write an invoice for 2 vehicles which would be JUST under what WeBuyAnyCar would offer.

She would have to physically pay for them, rather than you gifting her the cars in exchange for her debt otherwise the liquidator could pursue you for a 'transaction at an undervalue'

If it's her intention to purchase the vehicle/s then best to do this either via the IP or via their recommended agent.

The other thing is we may be able to look into a CVA I'd presume.

Have you produced cash flow forecasts that can show the company will be profitable? Suspect HMRC may well be the issue here. If they are the largest creditor they will have the swaying vote in a CVA. If they have rejected a TTP that attitude may continue to any CVA proposal, although it would be a different section of HMRC that would make the decision.

You might be better off considering a phoenix liquidation instead.

What other implications in the real world does liquidating have?

• Any personal guarantees given to creditors will likely be called in.
• If the liquidator uncovers misconduct you can be pursued and held personally liable for repayment, a fine and/or disqualification

The IP said the DL won't be written off fully but most will because I don't own a property and don't have a lot personally!

Get their agreement to what you will repay IN WRITING!

Many of my YouTube video's cover the queries raised here. The link is in my signature below.

Best of luck going forward.

Thank you.

I will have a read through.

I think some of your questions will need the help of my accountant so I will ask!

 

[Lisa Thomas]

No problem, you're welcome.