The Spongebob plan !!

[Sky Racer]

OK.. So I have read and re-read the many posts on closing down the company yourself. Seems simple enough and basically cost nothing too which is great BUT..

If I have read it all correctly it seems to hinge on monies being owed to those nice people at the revenue so what if the company only owes money to the director by way of a director loan / unpaid salary and a few odd small invoices from suppliers ?

How would you go about closing a business down if nothing is owed to the revenue ?

It's a Ltd co. with debts of £1500 or so in misc invoices, approx 14k on a loan to the bank but the director has issued a personal guarantee on it. No one else is owed any money, no VAT, no corporation tax or anything like that is due.

The company accounts are up to date but the current year end is up in four weeks.. would we need to do a return for the final year of trading ?

Guess first step is to actually stop trading ? Then go see the accountant to discuss next steps ?

 

[Sky Racer]

Forgot to add that the company currently has goods in stock with a retail value of about £14,000 and there is currently an overdraft in use to the tune of about £2000

 

[Spongebob]

http://www.companieshouse.gov.uk/forms/generalForms/DS01_striking_off_application_by_a_company.pdf

Fill in the form and send it off to Companies House with a cheque for a tenner.

The company's creditors have the right to object to it being struck off but for the sums involved it is unlikely that they will.

Keep checking the company's status on the Companies House website and when it says 'Dissolved' you know that the company is no more.

Technically, the company's assets become the property of the Crown...



...yeah. right!


The beauty of closing the company this way is that no receiver or anyone else will ever ask any awkward questions.

 

[Sky Racer]

Thanks for that.

Would you say it is still a good idea to write to the people owed money ? as in send them a copy of the letter that was outlined in your post about liquidation.

 

[Spongebob]

It is not just a good idea - it is essential!

Sending out this letter to all creditors demonstrates that the director is fulfilling his legal obligations and is being open and honest about the situation the company is in.

If nothing else, this is invaluable from a PR perspective. You are not going to be particularly popular with any of the company's creditors, but this letter will allay any outright animosity and reduce the chances of any creditor making life unduly difficult for you. Indeed, most if not all will simply melt away.


In the vast majority of company insolvencies, HMRC will be a major creditor; in many cases they will be by far the biggest. In this situation the strike-off route to company closure will not work as HMRC will routinely object to it, and ultimately they will initiate winding-up proceedings through the High Court.


In your case however, it is unlikely - particularly after receiving the above letter - that any of your creditors will bother to make an objection to the the striking off of the company. There is clearly nothing to be gained for them.

 

[Spongebob]

I really must get around to setting out 'The Spongebob Plan' in detail. Perhaps it could be a sticky thread...



...Mods?


And how about a seperate forum for matters relating to insolvency?

 

[Sky Racer]

Thanks for the clarification and update.

I've done the CH form and am just printing off the letter.

We ceased trading a week ago and the largest bill outstanding is £980, the other are under £250.

Only thing apart from those is the director loan so could the remaining company stock & assests be transferred to the director as part payment ? thus leaving the company with no money, no assets and no stock ?

 

[arcon5]

In cases of banruptcy this would be considered preferential payment and nt allowed, I dot have a clue if there is a similar rule for ltd company's but I suspect there may be..... But unless a creditor is going to scrutinise your accounts and pursue it via the courts it's unlikely to come to anything. Id be inclined to do just that, althoughs it's probably not considered the 'right' thing to do

 

[Spongebob]

You're not supposed to apply for striking off until 3 months after ceasing trading, but you might as well try it - there is nothing to lose.

Of course, grabbibg the assets for yourself is unlawful, but if the strike-off goes through no-one will ever know of their existance, never mind what happened to them!

Although technically the assets of a company which is struck off become the property of the Crown, there is no government agency whose job it is to go looking for them. Nothing will happen.

 

[Sky Racer]

Form to companies house and the letters to creditors are in the post....

Our accountant has been informed and he agrees with the plan of action so far and said to hang on to all the stock and if poss try to sell it as a wholesale lot or in a few smaller job lots myself but hang on to the funds in case any nasty bills arise or a creditor try's to make things difficult. As the director loan is considerably more than any other company debt he said that any money raised from the sale of the old stock could go towards the director loan so long as a portion of it was put to one side to pay other creditors. But he did say it is highly unlikely anyone will object to the striking off as the amounts owed are quite small and generally no one goes looking for the left over stock.

Guess the waiting game begins......

 

[Andrew46]

In my view if the closing of the company goes ahead in the way proposed it would be of dubious legality unless a deal is done (without misrepresentations) with each and every creditor. Admittedly the OP might well get away with the plan.
By the way Spongebob, there is a government agency whose job it is to deal with dissolved companies' assets (i.e. "bona vacantia"). It is the Treasury Solicitor:
http://www.bonavacantia.gov.uk/output/companies-faqs.aspx

 

[Spongebob]

In my view if the closing of the company goes ahead in the way proposed it would be of dubious legality unless a deal is done (without misrepresentations) with each and every creditor. Admittedly the OP might well get away with the plan.

Surely that's the whole point!

Advice setting out what the law is is important, but advice detailing what you can get away with is far more useful!

Good solicitors understand this better than anyone.

By the way Spongebob, there is a government agency whose job it is to deal with dissolved companies' assets (i.e. "bona vacantia"). It is the Treasury Solicitor:
http://www.bonavacantia.gov.uk/output/companies-faqs.aspx

And the treasury solicitor is going to send someone out to every director of every dissolved company to see if he's got any loot stashed in his garage?

Or to check whether his ebay account has been very active recently?

Or how many car boot sales he has taken a stall at in the last couple of months?

In real terms, there is nobody whose job it is to check on these things...

 

[Sky Racer]

Nothing of dubious legality going on.

All perfectly above board and the striking off is being followed in accordance with the rules.

The company has ceased trading, all creditors have been informed (or will be when they get the mail today !) and we are taking steps to recover as much from the left over stock as possible so as to pay off any remaining company debts.

The creditors would not be given any preference and would all be treated equally. i.e. if 10k was raised and the director loan was for instance 80pct of the company's overall debts then 8k would go to the director to pay off the loan and unpaid salary payments. The remainder would be split between the other creditors. Basically the company acts as its own IP without any fees.

Any proceeds from the sale of the left over stock would be held on to until the company was fully closed / struck off.

It's the most responsible thing a director can do, surely ?

If I wrong please let me know as I'm going on advice from people that have struck off businesses in the past and a very well respected and knowledgeable accountant.

 

[Andrew46]

Sky Racer - your last post was somewhat different from the impression given in the previous posts. I was, and am still, concerned that creditors might be misled if there is stock available for sale which is being concealed from them when told in the letter that there are "no funds or assets" available. If the letter says otherwise and is not misleading, then fine.
Put yourself in the position of a creditor who does not have the information and consider the position from his point of view.

 

[Robert Moore]

Yes, simply what you can get away with is what many businesses do. In the end it is not worth it for a creditor or the crown to go to expensive lengths to pursue small debts. However as a general rule if you owe more than £3000 to HMRC they may object. Also they have the power to reinstate a company 20 years later. Given HMRC are seriously under resourced and have bigger fish to fry then it is not much to worry about.

 

[JEREMY HAWKE]

Surely that's the whole point!

Advice setting out what the law is is important, but advice detailing what you can get away with is far more useful!

Good solicitors understand this better than anyone.




And the treasury solicitor is going to send someone out to every director of every dissolved company to see if he's got any loot stashed in his garage?

Or to check whether his ebay account has been very active recently?

Or how many car boot sales he has taken a stall at in the last couple of months?

In real terms, there is nobody whose job it is to check on these things...

This is afterall the Spongebob Plan

The Spongebob is not a plan for directors to do a bunk with the assests and live in luxury for the rest of their days .

I have spent fours years reading the Spongebob plan and it is for companies that are in trouble with no assets or funds what so ever it is for companies that have no hope what so ever and the directors have no where to go and are also personally out of funds .
If a company is in trouble the Spongebob plan is legal every step of the way . If you however cream off the company Bentley and 3 worldwide properties then the revenue ,companies House and your creditors may be out kick your arse !!! The creditors solicitors would have a field day !!

If your genuinly in trouble and there is nowhere left to turn then this plan is OK

 

[Spongebob]

Thank you Jeremy.

As you say, my advice is for small company owners who find themselves in an impossibly insolvent position with seemingly nowhere to turn.

Insolvency Practitioners are generally not interested in helping very small companies - there are not enough assets to sell in order to cover the fees they charge. Hence the typical demand by IPs for an upfront payment of around £5k + VAT to liquidate a company.

I can help small company owners facing insolvency not only save the cost of an IP, but also emerge with their shirt still on and a few assets with which to start a new company and have another go.

The expertise I have gained in this area is purely from my own experiences in insolvency; I was fortunate enough to find a path through the minefield and enjoy sharing my knowledge here with people in a similar desperate situation.

I have no interest in helping rogue directors, serial phoenixers, or con-men evade their responsibilities.

 

[Alan R Price]

In this case, sell the assets (to independent purchasers), pay the debts pro-rata (including any accrued corporation tax, although there seems to be little likelihood of there being a liability) and go for striking off. No need for an IP.

Don't fall for the ambulance-chasing letters that will flood through your door, promising the World.

 

[Spongebob]

In this case, sell the assets (to independent purchasers), pay the debts pro-rata (including any accrued corporation tax, although there seems to be little likelihood of there being a liability) and go for striking off. No need for an IP.

Don't fall for the ambulance-chasing letters that will flood through your door, promising the World.

Isn't it wonderful to know that there is at least one honourable Insolvency Practitioner out there?

Well said Alan, and well done for saying it.

 

[Brad Naylor]

Has anybody ever seen Alan R Price and Spongebob in the same room together?

 

[arcon5]

Has anybody ever seen Alan R Price and Spongebob in the same room together?

No - they tend to lock the door behind them

 

[JEREMY HAWKE]

Has anybody ever seen Alan R Price and Spongebob in the same room together?

Ha ha good point

 

[Spongebob]

Has anybody ever seen Alan R Price and Spongebob in the same room together?

The barman at Sherwood Forest Golf Club in Nottinghamshire certainly has!

 

[Alan R Price]

Has anybody ever seen Alan R Price and Spongebob in the same room together?

Hahahaha!

I think Bob and I represent opposite ends of a particular spectrum. He is not restricted by a professional body's rules and regulations whereas I have to play a completely straight bat. As he knows, some of what he suggests makes me wince; and while in reality sometimes people get away with bending the rules, I have to keep my advice completely within those rules.

 

[Charlie B ACS]

Hahahaha!

I think Bob and I represent opposite ends of a particular spectrum. He is not restricted by a professional body's rules and regulations whereas I have to play a completely straight bat. As he knows, some of what he suggests makes me wince; and while in reality sometimes people get away with bending the rules, I have to keep my advice completely within those rules.

I don't know about Sherwood Golf Club, but apart from in a business sense, where the bat is absolutely straight, on a cricket field it's usually tucked under his arm, walking back to the pavilion.

 

[Alan R Price]

I don't know about Sherwood Golf Club, but apart from in a business sense, where the bat is absolutely straight, on a cricket field it's usually tucked under his arm, walking back to the pavilion.

Thanks, Chas. I love you too!

 

[mcknat]

Hi was just reading this post and loking at the letter as outlined by Spongebobn.
With reference to the letter it is advisable to have stopped trading completely I guess? We are looking to cease everything by 6th January although everyone except 2 of the major creditors already know this. Debts to them equate to c £25k. Should we wait until then to send a letter like this?

 

[Spongebob]

Hi was just reading this post and loking at the letter as outlined by Spongebobn.
With reference to the letter it is advisable to have stopped trading completely I guess? We are looking to cease everything by 6th January although everyone except 2 of the major creditors already know this. Debts to them equate to c £25k. Should we wait until then to send a letter like this?

If you are planning to cease trading because the company is insolvent you really should do it immediately. Your principal legal obligation as a director is to cease trading as soon as it becomes clear that the company is insolvent and that there is no realistic prospect of it becoming solvent again. If your intentions are public knowledge you could be putting yourself in a very exposed position by continuing to trade until 6th January.

I am guessing however, that your business is a retail shop. If this is the case and you have some merchandise left it would be a shame to miss out on the busiest time of the year for shifting stock. At the same time, your creditors will be more than likely be enjoying an extended Christmas break.

I would send out the letters second class tomorrow (Thursday 20th) in the safe knowledge that they will not be read until Wednesday 2nd at the earliest - more likely Monday 7th. Meanwhile hold a 'Liquidation Closing Down Everything Must Go!!' sale and get rid of as much stock as you can can for whatever you can get for it. Do not mess about - slash prices by 50% or more and clear the place.

Account for the proceeds of this sale seperately and do not use any of this money for paying creditors at this stage. Then wait and see what the response from your creditors is once the letters are received. I doubt very much if a liquidator will ever be appointed but if one is you will have a good argument that your informal liquidation of stock was a perfectly lawful way of maximising the value of the company's assets for the benefit of creditors.

 

[mcknat]

Sorry Spongebob should have explained we are a holiday rental/serviced apartments provider. The last guest departs on 2nd Jan and we have not taken any new bookings for over a month. The current bookings were made many months ago.
There is a garage full if furniture to get rid off!
The model consists of renting from landlords and subletting out to short term bookings. Bookings are made via 3rd party agents such as hotels.com etc. clients are worldwide.

The properties we have been able to, have been handed back to landlords and the remainder will be handed back 1st week in Jan.

 

[arcon5]

Then could be presumed you made the sale whilst solvent and merely fulfilling the contract for what would otherwise be a creditor?

 

[Spongebob]

Fulfilling existing contracts does not constitute 'trading'. 'Trading' means entering into new contracts, whether they be sales or purchases.

I reckon you're in the clear.

 

[MrAnchovy]

Although technically the assets of a company which is struck off become the property of the Crown, there is no government agency whose job it is to go looking for them.

Rubbish.

The Crown has nominated the Treasury Solicitor, operating through the bona vacentia office, as its agent in administering these assets, although it is true that in many cases it will disclaim them.

 

[MrAnchovy]

Fulfilling existing contracts does not constitute 'trading'. 'Trading' means entering into new contracts, whether they be sales or purchases.

Rubbish.

Trading encompasses any activity undertaken with a view to carrying on a business for profit.

I was a director of a Special Purpose Vehicle that only entered into four contracts on the day it commenced trading more than ten years ago - do you think this company is not trading now?

 

[Spongebob]

Rubbish.

The Crown has nominated the Treasury Solicitor, operating through the bona vacentia office, as its agent in administering these assets, although it is true that in many cases it will disclaim them.

The Treasury Solicitor is tasked with administering such assets, not looking for them.

What I said was;

Although technically the assets of a company which is struck off become the property of the Crown, there is no government agency whose job it is to go looking for them.

 

[MrAnchovy]

The Treasury Solicitor is tasked with administering such assets, not looking for them.

Are you aware of the scope of the Crown's appointment of the Treasury Solicitor?

In any case the TS doesn't need to look for them - UK banks are obliged to notify the TS of balances in the accounts of dissolved companies, and anyone who wants to take ownership of other assets without stealing them must write to the bona vacentia office saying what they are.

 

[Spongebob]

Are you aware of the scope of the Crown's appointment of the Treasury Solicitor?

In any case the TS doesn't need to look for them - UK banks are obliged to notify the TS of balances in the accounts of dissolved companies, and anyone who wants to take ownership of other assets without stealing them must write to the bona vacentia office saying what they are.

And what do you think the chances are of the directors of an insolvent company applying for it to be struck off while leaving a credit balance in the company bank account?

I do not need to incite anyone to commit a dishonest act such as clearing a company bank account before sending in a striking off application. Approximately 100% of people in this situation would do it anyway!

I do not approve of such actions. All I would say is that the chances of getting away with it are also around 100%!

You need to get real, Mr Smelly Fish.

 

[MrAnchovy]

All I would say is that the chances of getting away with it are also around 100%!

Is that all you would say? Do you not think it is misleading not to add that if you don't get away with it one penalty you may face is up to 10 years imprisonment?

 

[David A]

Rubbish.

I think this must be your favourite word.

If not, you surely make liberal use of it - and not always in an appropriate way.

 

[kelvin1950]

I think this must be your favourite word.

If not, you surely make liberal use of it - and not always in an appropriate way.

He's a frustrated diplomat.

 

[MrAnchovy]

I was using the word because Spongebob used it...

A lot of rubbish has been said in this thread about the dubious legality of this strategy.

... perhaps I have overdone it a little - the problem is Spongebob spouts so much rubbish it was just too easy!