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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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Hi, I was a Director of a Limited company from July 2013 to

Customer Question

Hi, I was a Director of a Limited company from July 2013 to 10th Feb 2014. I never had access to a company bank account or any cash flow statements. There was one other Director who is also the MD and despite my repeated requests for information and a bank account I could access, none was forthcoming.

I wasn't able to deal with the company accountant and had no final decision on the hiring and firing of staff. I was a Director in name only and was really just a paid member of staff.

In November last year I urged the MD not to appoint an extra staff member as it was coming up to a quieter time of year. He appointed them anyway.

At the end of December I was told there was an HMRC backlog with PAYE and NI contributions but never an exact amount.

I immediately urged the MD to make at least 2 but possibly 3 staff members redundant. He reluctantly make 1 person redundant at the end of January but nobody else.

I have had no pay from January 2014. I resigned as a Director on 10th February as the MD repeatedly ignored my requests for meetings or for him to contact HMRC for an up-to-date position on the finances. Since resigning I have discovered he's not done the last 2 VAT returns that were due either. I have found a new job and am officially leaving the company completely on Friday 21st march 2014.

The company is still trading but my worry is it may not be for much longer as he's not got in touch with HMRC as I asked him to do repeatedly. I would have done this myself when I was a Director but I wasn't privvy to the necessary information and didn't have any authority to set up a direct debit. I have never had access to the company bank account or statements, nor had a bank card to check the balance at any given time.

My main question is that given all this information, were the company to be liquidated by HMRC, how likely is it I could be found in any way responsible for what was owed? And is there anything I should do from a legal point of view just now to make sure there is no comeback on me? I have spoken to my own accountant who has said I don't have anything to worry about - last month I emailed her copies of all the correspondence that proves I was very concerned about how the company was being run and my duty to the creditors - these emails spanned a number of months.

I have emails to back up my requests for redundancies and to contact HMRC.

Thanks
Submitted: 3 years ago.
Category: Law
Expert:  Joshua replied 3 years ago.

Joshua :

Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.

Joshua :

From what you say you have resigned as a director. Are you aware that your resignation has been notified to Companies House please?

Customer:

Yes it has. On the 10th of Feb 2014. I wanted to resign sooner but needed the MD to sign the form.

Joshua :

Thanks.

Joshua :

Did you sign any personal guarantees for the company as director at any time?

Customer:

No, but I actually asked you a question on here last week about this. A PG was signed by someone else using their signature and initials without my knowledge. My name was printed on the form but I never saw it or signed it. It only came to light recently.

Joshua :

Thanks. Ah yes I recall - hellow again. I hope you are making some progress with that. As we discussed previously, I cannot see how you could realistically be made liable for that. Based on what you say I cannot see any crdible risk to you personally providing you have signed no personal guarantees. If HMRC come after the company for tax they will seek action against the company rather than its directors initially at least. If the company is made insolvent through action by HMRC or other party creditors then directors can be held resoponsible if creditors and show that the directors in question continued to trade through the company knowing the company to be insolvent. From what you say in respect of you at least this would not be possible to show on the basis that you did not have day yo day if in deed any access to the company financial information or bank account. In addition if you have correspondence between you and your co director (MD) expressing concerns this would further insulate you from any potential action against you personally.

Joshua :

Retain the correspondence you have. You may feel you wish to write a letter to the MD explaining the reasons for your resignation if you have not already done so in order that you fully go on the record about your concerns. This may not be necessary if you have already set down all of your concerns regarding the company in prior correspondence.

Joshua :

Beyond this I cannot see that there is much you would you need to consider doing that you have not already done.

Joshua :

Is there anything above I can clarify for you>

Customer:

Thank you for the reply. My concerns are very clear from the emails I sent over a number of months. I made the MD aware at the time of my resignation the reasons why and have outlined these reasons in an official letter of resignation which I posted to the office.

Joshua :

On that basis I cannot see that a furtehr resignation letter explaining your reasons is necessary. Hold on to the correspondence you have - this could be useful in the probably unlikely event of unlawful trading allegations against you shouwld the company become insolvent though unlawful trading is relatively uncommon except in extreme cases.

Joshua :

Is there anything else I can help you with?

Customer:

When you say relatively uncommon, I believe the sum owed to creditors is entirely due to HMRC and while I don't know exactly, I think it's around £25k. Although that is a guess. Of that figure was correct do you think any action would be likely?

Joshua :

No I don't. The reason unlwful trading claims against directors is uncommon is it is not straightforward to prove. That is not to say it cannot be proven but creditors need to show that directors new the company was insolvent at a time when they continued to trade the company. In your case given you had little or no knowledge of the company's day to day finances this would be all but impossible to show. In any event it only applies for any period that the company was actually insolvent and if the company was not insolvent at the time you were a director, this is a non issue from your point of view.

Customer:

Thank you. It may have been insolvent during my time but I wasn't able to determine that due to the lack of information available.

Joshua :

In the unlikely event of unlawful trading claims by creditors if you can demonstrate the above, this would serve as a substantive defence on your part.

Customer:

OK, thanks again for your help.

Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
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