Voluntary Insolvency

[chalkycheese]

I put my company into liquidation in March this year and did everything I was told to by the IP, leaving all documents and goods in the business site, filling out statement of affairs, attending creditors meeting etc...

He is now wishing to have a meeting with me in regard to the whereabouts of the assets of a part of the business sold before liquidation, when we did not know if liquidation would take place

What I want to know is 'What is the worst outcome of not co operating any further ?' I am utterly sick of the whole business; after 10 years I have gained nothing and cannot stand to have anything more to do with it.

I do not want to go to any more meetings, or answer any more questions to do with this business. I feel I have been eaten alive for the last 2 years.

It is very difficult to get a straight answer out of anyone I have asked; so if there is anyone out there who is able to answer my question I will be extremely grateful. Many thanks

 

[Rhodes100]

I would simply go along to the meeting.

If these assets were sold at an arms length transaction, i.e at market value you have nothing to worry about.

If you fail to attend he may consider that you are being obstructive, you dont want to be disqualified as a Director, or be accused of wrongful trading meaning you may became personally liable for some of the companys debts.

 

[chalkycheese]

Thanks for your speedy reply; I think he may try to suggest that the money from the sale should have been paid into the company that was later liquidated and that he will attempt to make a claim on that basis.

Do I understand correctly that he would have to prove wrongful trading, in order for me to become personally liable and that there would be a cost to him in doing this? I no longer have any assets such as a car or house or any other property.

thanks for your time.

 

[hbcraen]

The proceeds of the sale of any assets should have been paid to the company. If this has not been done he may try to recover the monies.

Whilst I do not have all the facts it appears that the liquidator would be wasting time and money ' coming after you' as you have no assets. In general terms a liquidator will only go after someone, if firstly there are funds to carry out such an action and secondly if there is money to gain.

 

[Rhodes100]

The money from the sale is the businesses assets.

To get the money out of the company you would have needed to either paid yourself a salary or a dividend equal to that amount.

You would of course need to pay tax on that distribution, so it should have been declared on your tax return.

Perhaps also you might have had a director current account with the company owing you money, if you had put personal money into the business to keep it going. There is no law to state that you cannot repay yourself as a creditor first in preference to your trade creditors.

 

[chalkycheese]

Thank you very much for your extremely helpful reply.

The money that set up the unit that was sold was all personal money, as incorporation had not taken place at that point in time, then further personal money was put in, but the business was unable to pay me a salary for over a year, or return any of the money.

My solicitor has not mentioned that it is permitted to repay myself, maybe because he has ongoing work with the liquidator which could be compromising his ability to act in my best interests.

Thank you again for your help.

 

[Alan R Price]

Chalkycheese

I am an IP.

First, you must cooperate with the liquidator. If you do not you could find yourself on the wrong end of a court application for a private examination on oath and end up having to pay the costs.

Second, I regret I have to disagree with Rhodes100 when he sayas: "There is no law to state that you cannot repay yourself as a creditor first in preference to your trade creditors." In fact section 239 of the Insolvency Act 1986 specifically precludes this and provides that a liquidator can recover money paid by way of a preference. He does not have to prove wrongful trading, which is a different issue entirely.

In practical terms however I agree with hbcraen insofar as it is unlikely a liquidator would sue you unless he thought he/the company in liquidation was going to get something out of you - but it is a risk, particularly if he thought you had "salted away" the proceeds of sale of the company's assets.

 

[chalkycheese]

Hello,

Does anyone know when cooperating with the liquidator whether I am legally compelled to physically attend his office. I have been responding by letter, but feel very disinclined to attend as I have ben so stressed by the whole situation that I really feel I cannot cope with any more. Dealing with it by letter is just about manageable.

 

[chalkycheese]

Thanks for your reply.
No individuals or companies are owed money.

However, I am interested in an unbiased answer to the question, which hangs on the definition of the word "attend" as your reply is an opinion.

 

[TurricanII]

Thanks for your reply.
No individuals or companies are owed money.

Doesn't insolvent mean that the company owes money but can not pay, and you have applied for the debts to be discharged? Why would the IP try to eek more money out? To pay his fees I guess!

It sounds like a members voluntary liquidation would be the route of choice if no monies were owed.

I am just reading up on flavours of insolvency, administration and liquidation and appreciate the information in this thread.

 

[Spongebob]

No individuals or companies are owed money.

In which case why did you put the company into liquidation?

Or do you mean that HMRC is the only creditor?

 

[Alan R Price]

Hello,

Does anyone know when cooperating with the liquidator whether I am legally compelled to physically attend his office. I have been responding by letter, but feel very disinclined to attend as I have ben so stressed by the whole situation that I really feel I cannot cope with any more. Dealing with it by letter is just about manageable.

Section 235 of the Insolvency Act 1986 says, amongst other things:

"Duty to co-operate with office-holder.

(2)[A director] shall—
(a)give to the office-holder such information concerning the company and its promotion, formation, business, dealings, affairs or property as the office-holder may at any time after the effective date reasonably require, and
(b)attend on the office-holder at such times as the latter may reasonably require."
​

The liquidator is entitled to require you to attend for interview however one would have thought most queries could have been dealt with via telephone or correspondence. If you can get a certificate from your doctor saying you are too ill to attend then you can be excused.



Turning this round it might be in your interests to attend for interview so you can deal with all the outstanding issues in one hit, rather than having the matter hanging over your head for weeks like the sword of Damocles.

 

[Alan R Price]

Doesn't insolvent mean that the company owes money but can not pay, and you have applied for the debts to be discharged? Why would the IP try to eek more money out? To pay his fees I guess!

It sounds like a members voluntary liquidation would be the route of choice if no monies were owed.

I am just reading up on flavours of insolvency, administration and liquidation and appreciate the information in this thread.

Reading between the lines it sounds as though the company probably has tax debts that it can't pay and is therefore insolvent. A members' voluntary liquidation can only be used if the company is solvent and has assets to distribute to its shareholders.

A liquidator has wide-ranging powers to pursue claims against directors and other third parties on behalf of a company and its creditors. Amongst other things he can seek to recover directors' overdrawn loan accounts; payments made to creditors preferring them over the others; and assets transferred to third parties at an undervalue.

 

[smd]

yes, you do have to attend any meetings the liquidator requests, as long as it is reasonable for you to do so. As a Director you have responsibility to assist until the Company ceases. I have been in your position and sympathise how stressful it can be. I probably did more than I needed but I was praised by the liquidator for my co-operation. Hope this helps.

 

[CompanyRecovery]

I see this every day.

"Friendly IP" turns out to be not so friendly!

First of all, do not let it get you down or stress you out as worse things happen at sea.

IPs (no offence Alan) are very self important in my experience and any resistance gets their backs up. Even if the probability is that you have diverted funds away from the company or carried out transactions at under value and he won't sue you, he can still write you a poor D1 report and report your behaviour to the DTI who seem to be very keen to ban directors at the moment.

If you want my advice, agree to the meeting on the proviso that the IP provides you with the topics that will be discussed so that you may prepare for the meeting.

It is worth a try and I doubt he will decline to provide an agenda.

Feel free to PM me if you need any help. I am not an IP, but my business is bridging this gap between director and IP.

It is certainly in your interests to comply.

 

[Alan R Price]

IPs (no offence Alan) are very self important in my experience and any resistance gets their backs up.

Ouch! I agree that my profession has its share of "up-their-own-bums" but I don't think we're any worse than any other specialists. The important thing is to find an IP one is comfortable with and to cooperate fully with him/her. Apart from anything else, this will help keep costs down, which could be important if the directors have given personal guarantees.