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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3671
Experience:  Solicitors 2 years plus PQE
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I a customer makes a claim against our company for loss of

Customer Question

I a customer makes a claim against our company for loss of profits or negligence and we loose and ordered to pay settlement and legal fees but dont have the money. 1. how is the payment settled, 2. can we be forced to raise the money from another company we are directors of, 3. can we be touched personally. We are a limited company.
Submitted: 2 years ago.
Category: Law
Expert:  Alex J. replied 2 years ago.
Hi
Thank you for your question and welcome.
My name is ***** ***** I will assist you.
Is the Judgment from the court only against the limited company?
Kind regards
AJ
Customer: replied 2 years ago.

It hasn't happened yet but the client has indicated it will be against the limited company, yes. I am meeting with the client tomorrow morning to try and come to a resolution without legal action. We do not accept fault as the technical issues that occurred are variables beyond our control but we would rather it not go to court as it is a very complex matter and could easily go against us.

Expert:  Alex J. replied 2 years ago.
Hi,
Thank you.
I will answer your questions as follows:
1. Generally when a court order is made you have 14 days to pay in full unless you come to another agreement with the creditor concerned. If you pay within 28 days you can prevent the Judgment being registered against your credit file;
2. You cannot be forced to raise the money from another company if the Judgment is in the name of the company only. A company is a distinct legal personality and liable for its own debts unless the other company some how guarantees its payments obligations (but this seems unlikely).
3. The directors are unlikely to be personally liable. However a director can be made personally liable if you trade the company knowing it cannot pay its debts and it subsequently goes into administration or liquidation. I presume the directors have not personally guaranteed the company debts.
I look forward to hearing from you.
Kind regards
AJ
Customer: replied 2 years ago.

Thank you AJ.

1. OK. So if the company cannot afford to pay the judgement, we can seek a settlement plan of sorts?

2. No there is no connection between companies other than directors names on them.

3. The directors have not personally guaranteed the company debts and we currently do not have any debts. If we were ordered to pay a substantial amount of money, the company could not afford it but at this time we are not trading knowing we cannot pay any debts as there are none.

Expert:  Alex J. replied 2 years ago.
Hi,
Thanks.
1. If the company cannot afford to pay then you can try and agree a payment plan with the claimant, however the claimant would be entitled to petition for the winding up of the company if you could not reach a payment plan. The claimant is likely to want the money so I would be surprised if they did not agree a payment and opted to pursue a winding up petition.
2. If the Judgment is in the name of one company the liabilities for the two companies are separate regardless of whether they have the same directors. The only issue may be if you had dissipated assets between the companies to avoid your creditors - such transaction could be set aside by an administrator or liquidator.
3. If you the directors know the company is heading to insolvency then they should take advice from an insolvency practitioner at the earliest opportunity. It is an accepted principle from the Insolvency Service that taking professional advice and following it is the best way for directors to avoid personally liability.
Kind regards
AJ
Customer: replied 2 years ago.

Can you please explain what a winding up petition is?

Expert:  Alex J. replied 2 years ago.
Hi
Thank you.
A winding up petition is the initial process by which some one can petition to put a company into liquidation.
The petition is made, then advertised and once this process has been completed a winding up order can be made and the company will be placed into liquidation.
Kind regards
AJ
Customer: replied 2 years ago.

OK, and if that happens, then they can go after the directors personally?

Expert:  Alex J. replied 2 years ago.
Hi,
Thank you.
Theoretically yes - however this is very unlikely as directors can only be held personally liable where:
1. They have taken company assets;
2. Deliberately traded the company knowing it was insolvent.
Personal liability of directors for Company debts is a rare occurrence. If the directors think there is a chance the company might go insolvent then they should take professional advice.
Kind regards
AJ