Refund deposit before closing ltd company?

[Sue Rivers]

Hi everyone,

I run a kitchen design & installation Ltd company which I started in 2007. We took a 10% deposit for a job in October last year which we expected to start end of January/beginning of February. The customer is arranging his own builder to take out a false chimney but we can't organise the kitchen installation until he has booked his builder. I emailed him after a site survey in November to ask for his builders contact details so I could project manage everything. I got no reply so sent another email in January asking again for this information and informing him there was due to be a price rise on the furniture if it wasn't signed off by the 10th January, thinking this would prompt a response. I posted out a letter the next day to back up the emails, then followed this up by phoning him on 10th to say we had until the end of 13th to secure the prices I had quoted, but there was no answer so I left a message. Nearly 2 weeks on from my first email this year and they have not attempted to contact me.

I have been looking at our accounts today and having recently lost a job and with no new jobs on the horizon we only have enough cashflow to take us to April before we start going into debt. As trade had been very difficult over the last 2 years we are considering dissolving the company while we are solvent as we don't want to be forced into liquidation.

My queries are:-
How long can a customer reasonably delay a job that they have paid a deposit for?

If we decide to dissolve the company, do we need to refund the deposit in full?

The customer now has full copies of the kitchen design plan and elevations that I drew up which we do not release until a deposit has been paid. Can I charge for these from the deposit they have paid if we decide to dissolve and partially refund them?

If we do apply for dissolution in April and I still haven't managed to contact him would we be in breach of directors duties? At the time the deposit was paid we could afford to do the job within the usual timescale of 8 - 12 weeks and the cashflow from the job would also have kept us going another few months, however I can't justify paying the overheads indefinitely beyond April just so we can honour this job.

Any advice and thoughts very much appreciated!

 

[Scalloway]

What do your terms and conditions for the job say?

 

[Sue Rivers]

What do your terms and conditions for the job say?

Hi Scalloway, we have ever only listed payment terms with a job, 10% deposit, 40% payment after survey, 40% on delivery of the furniture & last 10% on completion. I haven't invoiced the 40% yet, which was due by our terms in December, as I couldn't sign the furniture off then. Once signed off it leaves me liable for the cost of the furniture, regardless of whether the job progresses, and without a confirmed installation date I wasn't prepared to risk that. Usually once a deposit has been paid my customers want it all done yesterday, I've never experienced this before!

 

[DavidWH]

Personally I wouldn't be returning any deposit. But that's not legal advice.

What's to say the builder who removed the chimney, didn't suggest getting a quote from his mate who fits kitchens, and they came in cheap enough to write off the 10% and still save?

You've spent time & effort organising the job to this point, making reasonable attempts to contact the customer who hasn't replied.

 

[billybob99]

Hi Scalloway, we have ever only listed payment terms with a job, 10% deposit, 40% payment after survey, 40% on delivery of the furniture & last 10% on completion. I haven't invoiced the 40% yet, which was due by our terms in December, as I couldn't sign the furniture off then. Once signed off it leaves me liable for the cost of the furniture, regardless of whether the job progresses, and without a confirmed installation date I wasn't prepared to risk that. Usually once a deposit has been paid my customers want it all done yesterday, I've never experienced this before!

Timewaster customer. Keep the deposit.

 

[Sue Rivers]

Thanks for all your replies, I have had a lot of time wasting customers over the years who pick my brains then take my ideas to their builder to get a cheap kitchen from Howdens. I've lost a lot of jobs to builders! I've never charged for the design service, but refuse to give out copies of the plans until a deposit is paid to protect myself from becoming a free design service. I must say though I've never had someone pay a deposit then disappear, this is a new one for me. In past years we've always had a huge safety net of cash in the bank so the length of a job has been irrelevant, but all jobs have always been completed within 4 months max from the deposit being paid. It's sods law that the first time our cashflow has reduced significantly we get a customer who is not in a hurry to get anything done. If it's the other way round & a customer has paid for something & the supplier/trade are dragging it out I'm sure there are consumer laws to cover that?

 

[Lisa Thomas]

You will need to send the customer notice of the intended dissolution and they can object.

 

[Sue Rivers]

You will need to send the customer notice of the intended dissolution and they can object.

Hi Lisa, if I sent a covering letter with a cheque for a partial refund, with costs taken out for the designs, (which would then be theirs to use with another company) would they still be able to object? We still have time before going down the dissolution route so I'm hoping they will make contact soon.

 

[Lisa Thomas]

I expect they can object easily enough if they know about it but if you then wanted to challenge their objection with C House (on the basis you do not think they are actually a creditor and therefore they have no capacity to object) you will probably need to satisfy C House that this is the case.

Having said that if you believe they are definitely not a creditor, even a contingent one, then you would have a reason not to send them a notice.

 

[Eldy70]

My business works in a more corporate environment, but we have had problems in the past with clients "parking" money at year end, and then not drawing down on it. (Basically, if a department doesn't spend all its budget by the end of the financial year, they get a smaller budget next year - so it's not unusual for them to ask a company like mine to invoice them for something like "General support" - but the truth is, you haven't actually done any work for them at the point you invoice, and there's nothing concrete scheduled in.)

We didn't anticipate this happening when we started trading, so hadn't legislated for it.

Now, however, we have a process for dealing with what we call "parked spend". We send monthly drawdown statements - so show clients what they've spent from the budget they've parked with us. And crucially, we've introduced terms and conditions that say clients have a maximum of two years to draw down on parked spend.

I appreciate this doesn't help in the case highlighted here - but thought I'd mention our approach in case anyone else reading this thread has similar experiences.

 

[Lisa Thomas]

A separate client account to hold monies on trust, or Escrow account could resolve.

 

[Eldy70]

I think if we get a big enough chunk deposited, that's what we'd need to move to. Currently, the amounts involved don't warrant the faff - both in terms of charges for banking facilities and for accounting. But yes - definitely one to move towards.