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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3695
Experience:  Solicitors 2 years plus PQE
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, My question relates to a commercial inter-company issue

Resolved Question:

Hello,
My question relates to a commercial inter-company issue as I am unsure what I am being asked to do is legal. I will refer to the companies involved as letters.
My company (Company A) established 5 years ago with the help of a £100k loan from Company B. The legal’s around this were fairly loose with an agreement made to repay the loan “as Company A made profit” and we also issued shares to Company B. There are no set amounts and the repayment terms definitely benefit my company.
Company B have recently run into two issues namely:
• One of their investors that I will refer to as (Company C) who have associated individuals, went into liquidation and the liquidators are looking to reclaim funds from Company B which were invested by Company C.
• Company B also lost a multi-million pound court case with a large compensation to be paid as they disadvantaged investors which has or may lead to their liquidation.
I am unsure as to whether Company B has gone into liquidation or will be going into liquidation or being investigated – but the impression I have been given is that it will be, if not already.
My question relates to the original money borrowed from Company B and shares issued… Company B have asked me to re-issue a “backdated loan agreement” in the personal name of Company B’s MD, so effectively hiding the original loan agreement and reissuing it in a personal name. My understanding is if a company went bust either the loan would die a natural death or be transferred to the liquidator.
I have also been asked to transfer Company B’s shares to Company B’s MD’s wife and I am aware that the other Company B shareholders are unaware of this request.
So the questions I have are:
• Does this appear to be money laundering or fraud?
• Would a solicitor (if involved) be legally bound to report it and if so who to?
The reason behind my question is that I am in a very awkward position and Company B are being very heavy handed, so if they thought I had inadvertently appointed a solicitor to draw up the loan documentation who had learned the information above, can I inform Company B the solicitor would report it if I proceeded (I am sure you know where I am coming from).
Regards
Carl
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 Company B's investment recorded as a loan in Company A's balance sheet?
Do the shareholders of Company A have a shareholders agreement?
Kind regards
AJ
Customer: replied 2 years ago.

Yes and No.

The loan is registered as loan on our books.

The shares were issued and registered at Companies House, but the shareholders agreement was never signed.

Carl

Expert:  Alex J. replied 2 years ago.
Hi,
Thank you.
I have received this - I will write a response - it may take me a while but I will aim to respond as soon as possible.
Kind regards
AJ
Expert:  Alex J. replied 2 years ago.
Hi,
Thank you.
The problem this arrangement is causing , is that by back dating the loan document (which is potentially fraudulent) you are assisting this other party in avoiding the creditors of the company.
Not only would a liquidator or administrator be able to unwind this arrangement but I almost certain that any solicitor would not be prepared to act for you.
Does the liquidator have copies of the loan documents? If this transaction were to be unwound and the director subject to an investigation or questioning from the liquidator you do not want to be in a position whereby you could be personally implicated for assisting this.
Has the liquidator contacted you about repaying the loan?
Kind regards
AJ
Customer: replied 2 years ago.

Hello AJ,

No have not been contacted, but I would be keen that they picked up on it. I am positive that Company B are hiding assets due to the High Court loss and compensation requirement.

My position is really awkward as I cannot inform the liquidator myself as they have no responsibility to protect me. I am sure you will have gathered I am looking at a way not to transfer the loan as I believe this is fraudulent in a manner in which won't appear as though I am the whistle blower.

My thought process is to tell company B that I requested a solicitor draw up a back dated loan agreement (play a bit dumb), then say the solicitor is very happy (as you mentioned) so my accountant, who is also our company secretary, will not proceed with the transfer. I will tell them that the accountant may report the matter if the accountant does not do it himself.

I needed to know if there would be any requirement to report the matter or if this would be a feasible course of events.

Expert:  Alex J. replied 2 years ago.
Hi,
Thank you.
If the accountant is the company secretary they will almost certainly report this to the liquidator.
If the solicitor believes you are doing something fraudulent they could potentially make a SOCA report and you will know if this happens because they will be evasive and stop responding to correspondence.
The solicitor is only likely to do this, if they feel you will agree to facilitate this fraud.
Ultimately the debt belongs to the company in liquidation, therefore and dealings with it are the right of the liquidator.
Kind regards
AJ
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