ltd company, CCJ, resigned director please help

[chiffonella]

Hi,
My husband set up a Limited Company with a friend. They then took a lease on a pub, but signed as individuals, not as the Ltd company. The friend was supposed to keep the accounts as he was more experienced. He has stolen 6 months of takings and not paid any bills, and hidden all mail from us so we were unaware of a CCJ against the Ltd company until the bailiffs arrived! They agreed not to take anything at the time.
We have now kicked the 'friend' out of the business, at the same time my husband resigned from the Ltd company. There are rent arrears in both their names, and debts in the Ltd company name, of which the 'friend' is now sole director. The pub is continuing to trade. What is my husband liable for? Can we keep the pub open?
I would really appreciate any helpful honest advice. Thanks in advance.

 

[Mosschops]

The pub can stay open, as long as you provide and agree a plan of repayments to your debtors.

Re your friend, I would go to the small claims court; report him to companies house; and possibly (I'm not quite 100% behind this one) the police. There are issues around him being an unsuitable director. Companies House themselves won't really get involved with the legals...

Ultimately he has stolen, not from you, but from the limited company.

You will be able to keep the pub; the baliffs etc will be understanding, as long as you are able to make (sizeable) repayments.

Hope that helps... if only a little...

 

[Paul_Rosser]

You need to go and get some proper legal advice as there are lots of variables.

Such as -

You say you have now kicked the friend out of the business, was this done legally ?

How are you trading ? Still under the limited company name ? Or in your husbands personal name ?

Who owns the licence to serve alcohol ?

 

[chiffonella]

Thankyou Mosschops and Paul for your quick responses.
The partner left amicably, we had a verbal agreement that he would take on some of the debt, but we're not putting much faith in that. Not sure how him leaving is legal/illegal? My husband is now running the pub in his own name, but the partner's name is still on the lease. We have kept good relations with local suppliers and breweries (it's a freehold) and the owner is meeting with us next week re rent debt. We've met with the bank, who are setting up a new account in my husband's name, and are being helpful over bank debts. Just some of the outstanding debts, (for example with Heineken, where just under 2k is owed,) 8k in total in the company name. Are we obliged to pay this off?

 

[Mosschops]

Him leaving represents poor responsibility from a director's perspective. As a director, he had legal responsibilitied to maintain the standing of the business. Theft from, and failing to legally maintain (since maintaining the accounts is actually a legal requirement - failing to do so would put you on the wrong side of HMRC) - are both criminal offences.

Given that the trading entity, for want of a better description, was supplied the goods and services in good faith, you might not be legally obliged to pay them off - but morally you should. That someone else has made a mess of the operation does not mean that your suppliers should loose out - it is for the operation itself to drag itself out of the mess that it was put into.

The extreme end of the scale is that you allow the limited company to go bust; you would then (probably) not be allowed to be directors for three years; you severely nark off your suppliers, and you only pay the debts in your own names.

In short, if you can afford it, pay your way out of trouble. I'd be very tempted to come down very hared on your friend....

 

[Paul_Rosser]

Just some of the outstanding debts, (for example with Heineken, where just under 2k is owed,) 8k in total in the company name. Are we obliged to pay this off?

Depends on the contract terms, you may also be in trouble if after your husband resigned you took on any new stock in the company's name as legally that would be fraud.

As I said you need to get some proper legal advice regarding where you stand and how you get rid of the old partner in the correct manner as the advice offered on forums can only be general at best.

There is a UKBF member called The Resolver who deals with this kind of thing and certainly knows his stuff, so hopefully he will be along soon to offer some advice.

 

[Colin Smith CBP]

Thankyou Mosschops and Paul for your quick responses.
The partner left amicably, we had a verbal agreement that he would take on some of the debt, but we're not putting much faith in that. Not sure how him leaving is legal/illegal? My husband is now running the pub in his own name, but the partner's name is still on the lease. We have kept good relations with local suppliers and breweries (it's a freehold) and the owner is meeting with us next week re rent debt. We've met with the bank, who are setting up a new account in my husband's name, and are being helpful over bank debts. Just some of the outstanding debts, (for example with Heineken, where just under 2k is owed,) 8k in total in the company name. Are we obliged to pay this off?

In terms of the company debts, you will probably be personally liable for some of it. Having owned bars and a restaurant myself, i'm certain that you will have signed a personal guarantee as part of opening a trade account with Heineken. What are the other debts that make up the £8,000? Have you personally guaranteed any of them?

Your creditors will be understanding and will work with you as long as you are making repayments. You need to sit down and work out an affordable repayment plan based upon the money available in your business to service the debt and then send a letter detailing your proposal to each of them, attaching the calculations you have used to arrive at the figure you are proposing in terms of repayment.

If you believe there is any chance that your former friend and partner might have any money to repay some of the money taken, you might want to consider legal action against him rather than depend upon his word that he will help. Having stolen from you already, I don't think you can put much faith in his word. However, legal action will cost money, so if you wanted to pursue this, you would need to factor it into your calculations for your debt repayment proposal.

This is a horrible situation. I understand what it is like to have somebody do this from personal experience (although it didn't get anywhere near as bad as it has done in your case) and I feel for you. Good luck and feel free to PM me if you think I could help.

 

[arcon5]

The extreme end of the scale is that you allow the limited company to go bust; you would then (probably) not be allowed to be directors for three years; you severely nark off your suppliers, and you only pay the debts in your own names.

That's simply not true. Many people shut down companies and start again, usually free of consequence.

In a honesty I doubt the police would want to get involved, claiming it to be a civil matter.

 

[Alan R Price]

I don't usually criticise people on here however the advice given by Mosschops is largely misleading and potentially dangerous.

"Report him to companies house". Why, what would the Registrar of Companies do? He is not an investigatory body or regulator.

"Re your friend, I would go to the small claims court". Why the small claims court? If it's theft, go to the police. Furthermore the small claims court is only for claims under £5,000. Six months' takings are likely to be rather more then £5,000 so any claim against him would have to be in the county court or possibly the High Court if the figures are large enough.

"Him leaving represents poor responsibility from a director's perspective." He didn't leave: they kicked him out because he'd been stealing.

"Given that the trading entity, for want of a better description, was supplied the goods and services in good faith, you might not be legally obliged to pay them off - but morally you should". Why? Whose morals are we talking about? OP was acting in good faith as well. Why should she stump up for the company's debts personally because of the misconduct of somebody else? That is what limited liability is for.

"The extreme end of the scale is that you allow the limited company to go bust; you would then (probably) not be allowed to be directors for three years; you severely nark off your suppliers, and you only pay the debts in your own names." Complete and utter tosh. The Company Directors Disqualification Act 1986 provides that directors of insolvent companies who have been guilty of misconduct (and this has to be serious) can be disqualified from acting as a director for two to fifteen years. I cannot see any evidence of serious misconduct in OP's posts, other than by the director who has been kicked out.

Sorry, Mosschops but you really shouldn't offer advice on matters of which you have so little knowledge.

What OP should do is take advice from an insolvency practitioner about the company's solvency; whether it can trade out of its difficulties; and her and her husband's potential exposure for continuing to trade in the interim period. They should also be very careful about incurring liabilities in their own names. An IP will also give initial advice about what claims lie against the dishonest director and how they can be pursued; although formal legal advice might well be necessary at some stage.

 

[Colin Smith CBP]

What OP should do is take advice from an insolvency practitioner about the company's solvency; whether it can trade out of its difficulties; and her and her husband's potential exposure for continuing to trade in the interim period. They should also be very careful about incurring liabilities in their own names. An IP will also give initial advice about what claims lie against the dishonest director and how they can be pursued; although formal legal advice might well be necessary at some stage.

Alan is absolutely right in what he says above, in terms of both the opinions he disputes and his proposed course of action. Having read many of his posts on here, I've always been impressed with his knowledge and professionalism.

The one thing I would say is that if the IP that you consult does believe that you cannot trade out of your difficulties, you would struggle to justify paying for their services. As I understand it, the limited company has no significant assets, as the pub is leased rather than owned. Although you may not have a clear picture of the total liabilities of the limited company, I understand you believe them to be circa £8K. The major obligations of the business (i.e. the lease, bank & trading debt with brewery) are either in your name or personally guaranteed by yourself. An IP would probably end up costing circa £4 - £5K + disbursements to liquidate the limited company. As you would need to pay for this yourselves upfront (given no business assets from which to recover the fee), this would prove expensive way to solve your problem, since the total debts of the limited company are about £6K (£8K - £2K guaranteed to the brewery).

Whatever you decide to do, you must determine if it is possible to trade out of your difficulties. If not, you need to stop digging yourself further into a hole. This is a complicated situation, so you will need to seek professional help.

 

[Alan R Price]

Colin

Thanks for your kind comments.

I think the issue with this business is that it may well be a profitable one that has been starved of cash by a director misappropriating its money. If that is the case, what it needs is to be ring-fenced from its debts so the management can concentrate on turning it around to get it back on its feet. The problem is that the "honest" director has resigned from the company and it is not actually clear who is running the business. An IP will help the OP and her husband understand if the business (as opposed to the company) can be saved. It could well be a suitable case for a company voluntary arrangement or perhaps an informal rescue if the debts are not too crippling.

If a rescue of the company cannot be achieved, it may be possible to phoenix the business via administration or possibly liquidation. It would be a great shame for a profitable business to be lost because of the actions of one individual. An IP will be happy to give an hour (or very often, rather more!) of free advice to the stakeholders to help them understand what their options are. If the business is loss-making and cannot be saved, then it may be possible to find a purchaser and limit the damage that way.

All is not lost but the position regarding profitability, ownership and legal structure of the business needs to be clarified urgently to avoid irreparable damage being caused and potential personal liability for the management/owners.

 

[Mosschops]

Alan


I wasn't sure how to mitigate past errors. I apologise (to all, really) for posting what might have been incorrect - it was based on my experience of troubling directors and businesses going bust - which honestly is based on single numbers of occurrences.

I shall take your comments on board - and shall try to be less forthright with my perspectives in the future - maybe adding balance with the amount of experience I have had.

Clearly, at no time, was misrepresentation intended, or dangerous advice.

DM

 

[Alan R Price]

Alan


I wasn't sure how to mitigate past errors. I apologise (to all, really) for posting what might have been incorrect - it was based on my experience of troubling directors and businesses going bust - which honestly is based on single numbers of occurrences.

I shall take your comments on board - and shall try to be less forthright with my perspectives in the future - maybe adding balance with the amount of experience I have had.

Clearly, at no time, was misrepresentation intended, or dangerous advice.

DM

Thanks. I didn't mean to be harsh but it was misleading.