Limited Company Bankrupcy - No Choice

[medievil2003]

Hello,

 

I run a company with my dad, he is the director along side his business partnet.

 

We have been working with our client for 10 years now, but we are now in the situation of him not paying anything. In total now, he owes us £420,000 (dont even ask how it got to this stage) the business has had to re-mortgage private properties and fill up credit cards to continue to run the company.

 

It's now at the stage of thinking about going bankrupt, our creditors = too much. One main thing i would firstly like to know that being a limited company what can they take/not take. i.e. are they allowed to take equity out of our private houses to re-pay our creditors in business?

 

Honestly, we have nothing for food, christmas even to pay our heating bills. In such a situation & i would be so grateful for everyones help & advice.

 

 

 

Thank You,

[palomino]

Sorry to hear of your plight. You have our sympathy.

 

Unless the company's debts were secured over your personal assets (usually your house but other things can be used as security) then the company's debt will not affect you personally. To answer your question explicitly the company's creditors cannot take your personal possessions.

They will try damned hard to do so - expect a lot flack and hassle.

 

The amount you are owed seems to be enormous. What steps have you taken to obtain payment?

 

A company does not become bankrupt. Instead it goes into liquidation, and the directors will normally appoint a liquidator to deal with this. Naturally that person or organisation will want paying so there needs to be some cash to pay them. Given that you are owed a large sum by one debtor then this may be a good option - liquidaors can be very impersonal in chasing assets of this nature.

 

Is your client a person, a sole trader or a limited company?

Do you obtain any guarantees or security from the client for the debts?

What are the relations like with your client? What were things like when the good times were rolling?

[medievil2003]

Hi Palomino,

 

Thank you for your prompy response, all i have to do in my work day is surf the internet trying to find a way out of this.

 

None of our companies debts are secured in anyway with our homes etc. Which by what your saying is a relief.

 

Ok, so we will go into liquidation - we have already sold all tools, told sub-contractors to leave, sold our office equipment and now have just one PC and a desk, plus a trusty kettle. What can they possibly take?

 

Out client, to my dad and his business partner is a "friend" too, and they trusted him when he said he would pay (over 3 months now) the payment were coming on a regular basis of £10,000 every 2 weeks this would be to help clear our debts and carry on with work, one disadvantage to this, we carried on work so it means that £20,000 per month was spent on material and labour and it puts us in the same situation.

 

The client owns numerous amounts of business's in different name, his main one is what we deal with and unfortunately there are no guarantees or security as all works previously completed were carried out on a speech basis and he paid. So along the lines we trusted him.

 

When the good times were rolling, he was releasing money in the region of £100,000 per month until the contract value was on £0. It didnt last long though, hense so much debt.

 

We rely on small amounts from him now, but over the 3 months past we dont want to tell him we are going into liquidation as he would take a hefty advantage over it knowing we don't have security on the jobs.

 

 

Am i allowed to suggest things on here, i.e. what options we have as i dont know if they are legal/illegal.

 

The MAIN reason we are in debt is because of the TAX, we are being penalised and are one of the unluckly companies that Mr. Tax man looks at every penny, so 6 months ago we owed £130,000 tax that cleared, now they come back to us with a £78,000 bill and said this is from 2 years ago :S

 

 

We are all so worried what next.

[Jan4a]

Hi

 

I would put your suggestions down - Palomino will then be able to tell you if they are legal/illegal. Be very careful though, liquidator will be scrutinising everything and you don't want a fraud investigation on your hands.

 

He is right that you will need some cash to pay a liquidator - can you find that? The sooner you get a liquidator involved the better - they'll get the Revenue off your back.

 

I'll leave it to Palomino now - he seems to have more knowledge re liquidation than me!

 

Good luck

Jan

[palomino]

Jan : Thanks for that! I'm not an expert on liquidation though, and I strongly exdorse your suggestion to sort out an liquidator asap.

 

Medievil : Since you are owed the money, and are going down the tubes without it, I think you have to talk to your friend in uncompromising terms about getting it repaid, even if by installments. If your friend will agree to this you must get it in writing.

The axe you will be holding over his head is that the liquidator will not be so willing or friendly. Your friend might get as little as 7 days to stump up the full amount, and if he doesn't he will be marched off to court forthwith. The liquidator's job is to liquidate the assets and pay off the liabilities. It's a pretty nasty job and liquidator's are pretty unpopular people, however you might have an opposing view if he can get things moving.

 

If your friend does agree to staged payments of the amount due then this will forestall the liquidator's efforts and leave him in a slightly better position. But that depends on the liquidator of course.

 

In essence your friend is now in the sinking boat with you. You have to make him aware of that - in blunt terms if necessary.

[toddle2u]

Hi

 

It would seem to liquidate the company sooner rather than later. You may not have to paythe liquidator anything as they would try and recover their fees from the debtor.

 

If you went into liquidation what are the chances of the debtor paying anything? If you thought he would pay you could even buy the debt back off the liquidator at a reduced rate and collect the debt yourself so that you can get some cash out of the situation.

 

Also if the Directors have not given any PG's to any creditors then their personal assets would b safe.

 

What are the qamount owed to other creditors apart from the HMRC?

 

Are you looking to start up again?

 

I have sent you a PM

[caro]

Hi

 

It would seem to liquidate the company sooner rather than later. You may not have to paythe liquidator anything as they would try and recover their fees from the debtor.

 

If you went into liquidation what are the chances of the debtor paying anything? If you thought he would pay you could even buy the debt back off the liquidator at a reduced rate and collect the debt yourself so that you can get some cash out of the situation.

 

Also if the Directors have not given any PG's to any creditors then their personal assets would b safe.

 

What are the qamount owed to other creditors apart from the HMRC?

 

Are you looking to start up again?

 

I have sent you a PM

 

Is there a reason for the PM? CAG works by sharing advice and ideas, plus (although I've no reason to doubt your advice) there's no way of it being corrected if wrong.

[toddle2u]

The PM was just a link to a professional who may be able to help or if he just wanted a chat with them. Nothing sinister

[Jan4a]

Is this the person who will do work without cash up front?

 

I've never come across that, all the Licensed Insolvency Practitioner's I've worked for want enough cash up front to get to creditors meeting stage (usually £2,000 to £2,500) - because if the creditors vote against their appointment they don't have the opportunity to go after debtors for their fees, so won't get paid for work done.

[kitchenboy]

Hi I am sorry to hear this, having had to deal with my company being insolvent, I know how you must be feeling. As is the case no matter how bad things seem there are always ways of working through them and you will find people will be sympathetic especially the Inland Revenue.

 

In my opinion there are several options available to you;

 

1. Liquidate and pay the fees yourself if the company can afford them.

2. Apply for a strike off in 3 months (from date of cessation of trade)

3. Invite creditors to wind you up themselves (don't do this if the company has the money to pay a liquidator as it will look extremely bad and will not help you)

4. If there is any chance that the company can trade out of this pickle then a CVA should be open to you, you will have fees to pay though but will get creditors off your back until the company is solvent. Also gives you a chance to chase the outstanding money due. You could even then petition for the wind up of his company forcing the liquidators to look into his affairs and as he has several companies may prove to be worthwhile.

5. Phoenix your company, allows you to shut down and have a fresh start you can keep all your clients and in some cases your VAT number.

 

Give Business Debt Line a call they are great and will go through your options. Also there is info on HMRC & National Debtline sites regarding Phoenix companies.

 

Hope this helps, the most important thing for you to do is to make sure that you are not trading, because if you trade while insolvent the Directors could become liable for company debts.

 

Chin up.

[Jan4a]

I'll back out now - great advice from Kitchenboy!

 

Jan

[toddle2u]

I've never come across that, all the Licensed Insolvency Practitioner's I've worked for want enough cash up front to get to creditors meeting stage (usually £2,000 to £2,500) - because if the creditors vote against their appointment they don't have the opportunity to go after debtors for their fees, so won't get paid for work done.

 

Many IP's will do it'at risk' so no fees need to be paid upfront at all

[Seminole]

Kitchenboy's advice is excelent. In particular you need to be careful about trading insolvently.