undischarged bankrupt & company advice. Is the law black and white?

[DJ2019]

Hi all, I hope someone can advice me on what I am allowed to do if anything.

I am a recent undischarged bankrupt so have at least 11 months left to be discharged if everything goes as it should. I will not go into the reasons why I went bankrupt as I do not think it is relevant to my question.

I am no longer working as I resigned as a director of a company and have now left due to the bankruptcy.
I hope this is the correct section to post...

I was toying with the idea to start up a new business but as a undischarged bankrupt I know this is not easy!

I have read if I choose to be a sole trader I must only trade under my name as this is the one which went bankrupt, If I have a trading name I am aware I would have to inform everyone I do business with I am an undischarged bankrupt which is not practical. For these reasons I dont think this is an option for me.

My next plan was for my father to start a company as the sole director and I would be employed by him. I thought this would be fine / legal to do. Citizens Advice told me it would be!
After spending a couple of weeks, building a website, getting business cards made, enquiry about insurance etc I came to the point where I was going to ask my father to form the company to make it official. I decided to double check the rules of being an undischarged bankrupt and this is where I hit the hurdle.

Quote from website, They all same similar.

"First things first, if you declare yourself bankrupt, you cannot be a company director of our own company or any others while the bankruptcy is undischarged. You are legally prohibited from managing, forming or promoting a limited company without first obtaining permission from a court."

I knew I could not be a company director but the working says "You are legally prohibited from managing, forming or promoting a limited company"
Looking at the wording slightly closer....
I would not be managing as all decision making and business running duties would be carried out by my father, I would be doing the physical work / jobs.
I'M ok on this point I think?
The next point is slightly difficult one as I may have input with my father in regards to forming the company but at the end of the day, He will be the sole director, shareholder and be putting up the capital. Think I can pass on this point too?
Third and final point. prohibited from Promoting a limited company. Forget about me wanting my father to start a company for now......How do I legally go and get a job for any other limited company and tell my new employer that I cannot recommend there company as ill be breaking the law. This seem bonkers and absurd. Now back to my father company. I have the same problem. How can I help any company that I work for grow If I am not legally allowed to promote them???????
I have read everywhere that I can apply to the courts for permission, but the is nothing on the internet indicating on how to do this.

Going bankrupt has been a horrible thing to do and I trying to do thing 100% perfect moving forward but it seems I may be commiting a criminal offence getting a job for ANY limited company.

I am after any advice which can help. Please note. I am a google warrior so I am after advice not easily found on the internet if that makes sense.

If you got to this point, Thanks in advance for any advice and also for reading

 

[Scalloway]

There is nothing to stop your father forming a limited company, being the director and hiring you to do the donkey work.

prohibited from Promoting a limited company

My reading of that means promoting the company to potential investors, eg going to a friend and saying my dad is setting up a limited company, can you put some money in too.

 

[DJ2019]

@Scalloway Thanks for your reply. My slight concern was if I was allowed to recommend the services my fathers company provides to friends, family and complete strangers in the street without breaking the law.

I know many on here may think i'm being over paranoid but my mum has been in criminal law most her life and reads it the same as I do. She also says its BS the way its worded.

Should I be making a call to the Official Receiver asking them on Monday morning or getting my Father to form a company and give me a job..

 

[Maxwell83]

I am with Scalloway - I believe the term 'promoting' in this particular (and some other) legislation refers to the act of promoting to potential investors or to attract investment (think "hey everyone, invest some money in this company to get rich").

Not 'advertising the services of the business to the public' (i.e. "hey everyone, buy these products or services from this company").

If not, as you say, every bankrupt person would be prohibited from merely working for any limited company (the vast majority of employers in this country) in almost any role that involved dealing with a paying customer. You couldn't work in Curry's advising customers on which HDMI lead they needed! That, IMO, isn't the objective of the legislation.

No harm in calling the OR to check what their take on the legislation is. Get it in writing if need be - have them state exactly what "promotion" means, and does that stop you working in sales for a limited company where you would be required to talk up the business' offering.

 

[Ian J]

[QUOTE="DJ2019, post: 2946274, member: 322029]

Should I be making a call to the Official Receiver asking them on Monday morning [/QUOTE]

No. It's nothing to do with you as you are just a potential employee but perhaps your father should contact the OR to ask them if it's OK to employ you

 

[Maxwell83]

My Google-fu must be strong; here you go:

"Promoting or forming a company
The order or undertaking prevents you taking part in the promotion or formation of a company.

A promoter is anyone who takes part in forming a company or, for example, someone who takes part in raising capital for the company before it is formed.

Formation describes mainly the legal acts necessary to bring a company into existence. You must not be involved in any of the stages of incorporating a company."

This is taken from an official Insolvency Service publication on the .Gov website, so its authoritative.

https://assets.publishing.service.g...fects-of-a-disqualification-february_2019.odt

The link will download the document. The document is in .odt format but can be opened in Word.

Disclaimer: It appeared safe to me (no viruses etc.) but I'm no IT expert so anyone worried about nasties in downloads should take their own precautions. I have literally copied & pasted the relevant bit above anyway.

 

[Maxwell83]

No. It's nothing to do with you as you are just a potential employee but perhaps your father should contact the OR to ask them if it's OK to employ you

He would be the one breaking the law, and the one committing the criminal offence, (if it were against the law) - not his father.

 

[DJ2019]

@Maxwell83 Your google skills are better than mine!!! This is the information I needed. Something in black and white that's official. I may be able to sleep tonight knowing there is light at the end of the tunnel.

Also thanks everyone else for you great input. I wish I registered on this forum years ago when all this started with an ex employer which became business partner and now someone I hold alot of resentment towards.

Thanks again!

 

[Chris Ashdown]

Would you not be seen as a shadow director, which i believe is unlawful

 

[Scalloway]

The OP would just need to be doing the donkey work, his dad would be doing all the organising.

 

[DJ2019]

Would you not be seen as a shadow director, which i believe is unlawful

I would not be doing anything another than the Jobs indicated within my employment contract which my Mother will write on behalf of my Father.

I am very familiar with how and when you are classed as a shadow director as in a previous company I worked for went into voluntary liquidation and the IP/OR grilled me and said I was a SD as I gave the director input on business decisions. I did manage to convince her I wasn't but it was not easy. It is easy to abide by the rules when you know them hence my asking for help and advice on this forum.

It seems the problems for small business nowadays is that nothing is straight forward and you need to be an chartered accountant and solicitor just to try and make a honest living.

Thanks for reminding me about this point as putting it fresh in my head!

 

[Ian J]

He would be the one breaking the law, and the one committing the criminal offence, (if it were against the law) - not his father.

It's all a matter of perception. If the new company were also to go bust it would be beneficial if he could show that his father was actually managing the company and not him

 

[paulears]

Can you imagine the advice you'd get if you posted

my son is an undischarged recent bankrupt, and because he cannot start up a new limited Company he wants me to form the company and employ him to run the business, with the legal status of my employee? I'm concerned that he's trying to get around his bankruptcy my using me to headline his business. He's a good lad and has the best intentions, but has proven to be a bit unreliable with other people's money. His mum has been involved in law for years and thanks the rules stupid, and says I should put my reputation and perhaps even my house at risk. I don't know anything about his business and seem to be talking the risk with no benefit to me - he says it will be fine, and not to worry.

The facts seem to be, you have been prevented from running a business and holding any kind of public office with financial responsibility. The option is there to ask for permission, but you'd rather skirt around all that fuss and bother, looking for legal loopholes in a system designed to prevent other people losing money.

From my self-employed, full responsible and moral perspective I think this kind of thing stinks. You messed up, and I'm not blaming you for that, but you've had one lot of debt effectively wiped off already and now want top shake off the punishment and restrictions to potentially do it again. I'm not willing to even attempt to find ways around the law you can use to put people at risk again. I'm sorry, but business comes with responsibility, ethics and morals. I've just got a different viewpoint to you. Of course, I'm sure you failed due to sheer bad luck, mischance, other people's problems and none of it your fault - but the court decided you messed up and gave you a way out. A year is hardly a long time. Get a job, earn some money and grow up a bit. You've messed up once, your dad is simply crazy to do this. however, your mum seems to think like you - the law is stupid, so stick her in as the sole director and let her take the hot seat and the responsibility, or doesn't she want to do it?

Sorry - but I've done it seriously for a long time, and never become rich - but have never, ever let a single supplier or customer down, even when it's really cost me dearly for my mess ups - which of course I've made. You want a system to protect you from performing badly, and have no responsibility at all. The worst type of business man.

 

[DJ2019]

@paulears

I respect your point of view but do not agree with some points as you are indicating Im trying to find a way to break the law without breaking the law. Surly from my comments above you can see I am trying to do everything by the book and within the law.

Just to help others that may find this post helpful. I want to elaborate on the reasons for me considering this option. Even if I was a sold trader the following would of happened.

My Father would be putting up capital for tools.
My Father would be getting in potential work
My Father would be doing the accounts
My Father would be ordering supplies
My Father would be paying the bills
My Father would do year end stuff.

In my eyes, the logical choice is for it to be his company so he gets return on his investment and time. All i'm good at is doing the physical work.

I am not sure if this makes any difference to your view but it may help you understand my situation.

I think regardless of what help I receive on this post I will contact the official receiver and may even direct them to this post.

Out of interest, what are your views on facebook and google. Are they doing it wrong?

 

[paulears]

That's a splendid solution - but not at all the impression I got from your first post.

My next plan was for my father to start a company as the sole director and I would be employed by him.

That's somewhat different. one of my regular clients (a quite well known celebrity) has had numerous businesses go bust/bankrupt/cease trading/administration over the years, and has almost a chapter of stuff on companies house. he seems to have no qualms whatsoever about the people who get hurt on the way. That's why my view is as it is. I wish your dad well.

 

[DJ2019]

I am not a well known celebrity which doesn't care about anyone but themselves. Thanks for your reply.

 

[Maxwell83]

That's a splendid solution - but not at all the impression I got from your first post.

That's somewhat different. one of my regular clients (a quite well known celebrity) has had numerous businesses go bust/bankrupt/cease trading/administration over the years, and has almost a chapter of stuff on companies house. he seems to have no qualms whatsoever about the people who get hurt on the way. That's why my view is as it is. I wish your dad well.

Your client seems to keep failing in business, so perhaps he should be banned from starting one. The OP has a personal bankruptcy and we do not know if it is anything to do with his inability to manage a business, it could be totally unrelated.

The irony is, being a director of a company that goes bust - owing money to customers & suppliers - does not automatically preclude one from starting and running another company.

However, a person who loses their only form of employment (perhaps an employee of the company mentioned above), cannot pay their credit cards and loans and goes bankrupt, IS automatically disqualified from starting and running their own company for a limited period.

The bankrupt individual has not had any failure in business yet cannot start one. The director of the insolvent company has, and yet is free to do it again. That is the injustice IMO.

But I ramble... provided the OP is not doing anything which he is disqualified from doing (which is going to be a question of fact, not assumption) he is allowed to be his father's employee, even if his father has only started this venture purely to employ his son. The law is clear on exactly what he can and cannot do, no loopholes are required provided he actually follows it.

 

[UK Contractor Accountant]

That's somewhat different. one of my regular clients (a quite well known celebrity) has had numerous businesses go bust/bankrupt/cease trading/administration over the years, and has almost a chapter of stuff on companies house. he seems to have no qualms whatsoever about the people who get hurt on the way.

Grant Bovey (Anthea Turner's ex) has 12 failed companies to my knowledge. His last msty ltd only made a £2.6m loss last year so not as a bad as some of his property company collapses

 

[UK Contractor Accountant]

Lets be clear here the OP has only 11 months to act out as a dummy employee before he can join the ranks as Director of the company and his father is sidelined.

The bankruptcy law has evolved over the years and people go bankrupt for various reasons with the knowledge that they came out the other side after just 12 months. I have heard that a lot of students declare themselves bankrupt once they have finished their degrees to avoid the undue hardship of Uni Fees debts.

 

[DJ2019]

Lets be clear here the OP has only 11 months to act out as a dummy employee before he can join the ranks as Director of the company and his father is sidelined.

I know this would be an option once I am discharged, but if my father is happy to continue at this point I will remain an employee and just ask for a pay rise

 

[Lisa Thomas]

Lets be clear here the OP has only 11 months to act out as a dummy employee before he can join the ranks as Director of the company and his father is sidelined.

The bankruptcy law has evolved over the years and people go bankrupt for various reasons with the knowledge that they came out the other side after just 12 months. I have heard that a lot of students declare themselves bankrupt once they have finished their degrees to avoid the undue hardship of Uni Fees debts.

Student loans survive bankruptcy...

 

[UK Contractor Accountant]

Student loans survive bankruptcy...

Except in certain circumstances!

 

[Maxwell83]

Except in certain circumstances!

What circumstances are those?

I thought all of the 'student-loan-in-the-bankruptcy' loopholes were closed for all bankruptcies after 1 September 2004?

 

[UK Contractor Accountant]

What circumstances are those?

I thought all of the 'student-loan-in-the-bankruptcy' loopholes were closed for all bankruptcies after 1 September 2004?

A student loan taken before 1st September 2004 might be included in a bankruptcy.

 

[Maxwell83]

A student loan taken before 1st September 2004 might be included in a bankruptcy.

I think that's incorrect - a bankruptcy which was entered before that date might include the student loan. But any bankruptcy entered after that date will not include a student loan, regardless of the date of the grant of the loan, regardless of which student loan plan it is on.

https://www.legislation.gov.uk/uksi/2009/470/note/made

"In England and Wales, any debt which a student loan borrower owes to the Secretary of State, Welsh Ministers or loan purchaser does not at any time form part of the debts of that borrower for the purposes of the bankruptcy, if the bankruptcy commences on or after 1 September 2004. If the bankruptcy commences prior to that date, only sums received or entitled to be received by the borrower prior to the commencement of the bankruptcy will form part of the bankrupt’s debts in the bankruptcy."