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Alex J.
Alex J., Solicitor
Category: Bankruptcy Law
Satisfied Customers: 3497
Experience:  Bankruptcy, liquidations, administrations, pre pack sales, re use of company names and director duties and offences.
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I need advice on the following situation: I have been trading

Customer Question

I need advice on the following situation:

I have been trading for nearly four years (since July 2009). My company has been doing okay but now I have a problem on my hands which I want to rectify quickly.

I have all my debts to suppliers paid although I owe the HMRC re tax and vat.

Vat outstanding from a past period is £4999 and corporation tax outstanding is £5000 from a past period and £5260 from last period and directors loan account tax at £3591.

Re vat - HMRC are accepting monthly payments from me to clear the debt off as they are for the outstanding corporation tax.

I am however considering winding up my company as a lot of the enjoyment I had out of it is now diminishing.

The balance outstanding on the Director’s loan account as at 31 July 2012 was £30,208, made up of £15,844 brought forward and £14,364 drawn during the year to 31 July 2012.

How would I wind this up with the said debts above and what impact does my overdrawn directors loan account have on matters?

If I wound the company up, would I be made bankrupt personally by HMRC?

i have no personal or company assets for them to remove from me.

Would they accept a consolidation of my debts into monthly payments over a future time period of say 5 years even if the company was wound up - is this an offer that I could make to them?

I do not want to go to any insolvency practitioners as I know the pitfalls and expense of this.

I also have another company which has the same company name as my original company with the word Media incorporated. This is going quite well financially - would I still be able to keep this going? However,if I wanted to, would I be able to wind this company up also - it started trading in September 2012 - has no tax or vat outstanding at present.

Thank you.



As the accounts stand at present they are showing an overdrawn loan account of £30,208 and I have also attached a breakdown of the loan account. £29,623 was essentially monies transferred to your personal account through the year.

This balance creates a problem in that the balance sheet is effectively insolvent and total drawings of £40,519 against monies introduced (unpaid salaries, unpaid dividends) of £26,155 has created a delicate position.

Due to the low profits in the company this year, we have been unable to clear the loan account down much by declaring dividends of only £8,000.


Regards,
Ally
Submitted: 3 years ago.
Category: Bankruptcy Law
Expert:  Alex J. replied 3 years ago.
Hi

Thank you for your question and welcome to Just Answer.

Was your other company formed within the last 12 months?

Just to clarify a director loan can be a loan to or from the company. In this circumstance do you owe the company the money?

Kind regards

AJ
Customer: replied 3 years ago.
Hi yes I owe the company although I am the only director abd shareholder wasn't aware I was doing wrong taking dividends out of company! Accountants did not advise. Yes new company was within last 12 months.
Expert:  Alex J. replied 3 years ago.
Hi

Thank you.

The problem is as the companies have similar names and you are a director of both if one goes insolvent you could be held personally liable under s216 of the Insolvency Act 1986.

The other issue is you are a debtor of the company and any liquidator will seek for these debts to be repaid by you.

If you can keep the company out of liquidation for another 12 months and at least repay what you owe then you may be ok to wind it up. Under no circumstance must you trade it knowing that insolvency is a distinct possibility otherwise you could be guilty of wrongful trading.

Otherwise you will need an Insolvency Practitioner to consider winding up at this stage. The insolvency service accepts that a defence to the offences under the insolvency act is to take professional advice.

Dealing with the accountant. Go and speak to them about winding down trading activities in an orderly manner. Does the company have any assets or book debts you can sell for example? When you have dealt with the company you can then look to take issue with the accountant about negligent advice but for the time being I would let it rest and focus on winding this company down in an orderly fashion.

I look forward to hearing from you.

Kind regards

AJ
Customer: replied 3 years ago.

Hi


 


Thank you for the advice to date but I still need further clarifications:


 


1. If I wind things up at this stage, is there a possibility that I will be made personally bankrupt because of the overdrawn directors loan account - will the HMRC do this or write the debt off? As previously me or the company have no personal assets whatsoever.


 


2. Am I able to wind both companies up and agree a payment plan with HMRC for the amount outstanding so that they will not personally bankrupt me if this is the situation.


 


3. Am I able to wind up the companies voluntarily myself?


 


 

Expert:  Alex J. replied 3 years ago.
Hi

Thank you.

1. If you liquidate the company without paying the loans back I would expect the liquidator to come after you personally and if you cannot repay then petitioning for your bankruptcy could be an option. You don't want to be struck off from being a director because of bankruptcy or company debts. I would carefully look at records and make sure that they don't show you having turned a blind eye to the company's insolvency.

2. Thank you I suppose there is nothing to stop you halting boh companies but If you can agree a payment plan it should be limited only to what you owe personally not for all the company debts;

3. Yes it is called a creditors voluntary winding up and requires a special resolution. However I must again recommend you do this with the assistance of an insolvency practitioner this is the safest way to ensure you avoid personal liability as far as possible.

I look forward to hearing from you.

Kind regards

Alex
Customer: replied 3 years ago.

Okay thank you.


 


1. This alerts me - how would I be struck off becoming a director? Re looking at my records and turning a blind eye - if I have arranged payment plans with the HMRC and are meeting them and still trading am I allowed to do this? I am also looking at transferring monies from my other company account to meet debts - is this acceptable?


 


2. What do you mean what I owe personally? I owe HMRC as I detailed in original message.


 


 

Expert:  Alex J. replied 3 years ago.
Hi

Thank you.

1. If the company goes bankrupt and you have been taking money out of it to avoid your creditors or trading knowing its insolvent you can be penalised and possibly temporarily disqualified as a company director. Yes you transfer money from the over company but it would have to be a loan and properly recorded and authorised by the shareholders.

2. I mean don't offer to pay HMRC debt to the extent that it is more than you personally owe the company.

Kind regards

AJ
Customer: replied 3 years ago.

Thank you.


 


 


So I could still trade both companies for the next 12 months and pay off my creditors and continue to trade if I continue to get business in?


 


Also, if I pay off my creditors, do I still have to pay back over £30000 to the company? The overdrawn directors loan account confuses me.


 


 

Expert:  Alex J. replied 3 years ago.
Hi

Thank you.

1. Yes you can still trade as long as you can pay your debts when they fall due and you are not deliberately trading the company into a further hole;
2. If the company has no other creditors then you can write the loan off and then wind the company up as you as the only shareholder will be the only party prejudiced at that point.
Kind regards

AJ

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