How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask Alex J. Your Own Question
Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3655
Experience:  Solicitors 2 years plus PQE
13113900
Type Your Law Question Here...
Alex J. is online now

Section 1)SUMMARY OF PROBLEM:1) A director of a limited

Resolved Question:

Section 1)
SUMMARY OF PROBLEM:
1) A director of a limited company, has not provided day to day trading records for the ten month period he was involved in the pub and responsible for day to day running. (He was not an employee and not a shareholder. He was company secretary)
2) He failed to pay rent and utilities as well as other creditors. He set up new a credit arrangement with a supplier knowing he already had unpaid debts with another supplier. That supplier is now also owed money. Approximate combined debt incurred including to HMRC: £25’000. Realisable assets: minimum £2000 – maximum £12’000 which is dependent on a possible council rebate)
3) Extensive rumours, reports and complaints of drug dealing and consuming by Paul and certain staff he employed. (no proof)
4) He fabricated a shareholding for himself on Companies House website.
5) He is prioritising removing what he claims are his personal assets from the pub. (worth between £2000 and £3000 at a guess) I refused to allow him to remove anything until insolvency solicitors are appointed and said he can take it up with them. He claims I am acting illegally and strongly objects quite often via email and facebook messages to my partner.
Section 2.
BACKGROUND
1) Jonathan Peck and I are partners and took a 3 year lease on a live music venue/pub. My sister, Odile Rault was also a director and did admin.
Original Company Structure: Jonathan Peck – Director and 100% shareholder and investor.
Odile Rault – Director and company secretary. Sharelle Wodehouse (me) Director.
2) Neither Jonathan nor Odile were involved in the day to day running it was just me.
3) I left the business in October 2014 due to ill health. My sister left as well. When I left, the business had been pretty much breaking even and was building in popularity. There were no outstanding debts or issues.
4) Jonathan runs his own small but busy armour making business just out of town so it was not practical for him to be involved in the running of the pub. When I left, he appointed someone else to manage the pub for a few months and in March/April of 2014 Jonathan was planning to wind up the company and hand over to someone else.
5) At this point an old friend from the distant past, Paul Deane, called and said he would like the opportunity to run it and turn the business around, and that once it was back on its feet, they would discuss shareholding or Paul taking over completely and Jonathan leaving. In the interim it would be profit share only.
Section 3
WHAT I HAVE DONE:
1) As Jonathan is so tied up with the armour business, I asked him to appoint me as director and transfer 100% shareholding to me. We filled in the shareholder transfer form but have not yet sent it to Companies House - I believe we have 30 days to do so.
2) Against Paul's express wishes, I have stopped the company trading and I removed Paul as director and company secretary. I also removed Jonathan as director. I am now the only director.
3) I have refused permission to Paul to remove what he is claiming are his personal assets, because I believe I am acting in the best interests of the creditors including HMRC by taking this precaution.
4) I have asked Paul for records verbally and in writing. I was told by Paul that he will not give me any records or deal with me at all.
5) I wrote to Paul explaining why I removed him. I can supply a copy of this if needed.
OUR OBJECTIVE: To wind the whole matter up as swiftly, legally and cost effectively as possible.
Paul's objective: 1) He wants us to let him have the ltd company. 2) He wants us to let him remove his personal assets from the premises.
QUESTION 1.
a) Have we acted legally in appointing me as director and shareholder and me removing Paul as director?
b) If this is legal is it advisable or should Jonathan remain as director and shareholder, or does not matter?
QUESTION 2.
Are we legally allowed to refuse permission to Paul to remove the items he claims are his personal property until insolvency solicitors are engaged?
QUESTION 3. I was told that we are obliged to report this whole matter as possible gross misconduct to the Insolvency Service, Investigations and enforcement.
a) Are we obliged to report this to them?
b) If we do that, and if this results in an investigation by HMRC , to your knowledge, is it likely that they will go through the entire trading history of Belum Ltd?
c) Are they also likely to go through the other businesses of Jonathan and mine? I know they CAN but just wondering how usual it is or what provokes this. We believe our other businesses are in order, but naturally no one likes to be investigated.
Submitted: 2 years ago.
Category: Law
Expert:  Alex J. replied 2 years ago.
Alex J. :

Hi, Thank you for your question and welcome. My name is ***** ***** I will assist you. I am a company lawyer. I will take moment to review this information and answer your questions in turn, before i do can you confirm (i) is there a shareholders agreement (ii) does the company use Table A articles (iii) Have you personally guaranteed any company debts (iv) Is the HMRC debt over due?

JACUSTOMER-xvlidjdp- :

Hi thank you for your message.

Alex J. :

Hi,

JACUSTOMER-xvlidjdp- :

The shareholding is the 1 share that comes with an off the shelf company. Articles of Assoc are the default ones that come with new company.

Alex J. :

Hi Thanks was the company formed after october 2009?

JACUSTOMER-xvlidjdp- :

We have not personally guaranteed any company debts. Paul Deane has a PG in place with at least one of the creditors.

JACUSTOMER-xvlidjdp- :

The HMRC debt is overdue

JACUSTOMER-xvlidjdp- :

p.s Hi :)

JACUSTOMER-xvlidjdp- :

yes

Alex J. :

Great thank you - so the company will have Model Articles. I think that is all the information I need for the moment. I will write a response with reference to the Companies Act, Insolvency Act and with some practical advice. This will take me a little while but I will aim to post my answer by midday tomorrow. Is that ok? Or did you need a response sooner? Kind regards AJ

JACUSTOMER-xvlidjdp- :

Midday tomorrow is fine thank you

Alex J. :

Thank you very much. Kind regards AJ

Alex J. :

Hi, I am just typing up my answer now. I am going to switch to Q and A mode as it is easier for me to read. Kind regards AJ

Expert:  Alex J. replied 2 years ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

What happens now?

If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Expert:  Alex J. replied 2 years ago.
Hi,
Thank you for your patience.
I will answer each question in turn:
1. QUESTION 1.
a) Have we acted legally in appointing me as director and shareholder and me removing Paul as director? -
(i) Yes you have acted "legally" in transferring the shares - you had the agreement of the shareholder and you did it with a stock transfer form - this Paul character had no charge or claim (presumably you only verbally promised him a share) on the shares so you were free to dispose of them as you wished;
(ii) When you became 100% shareholder you were basically free to appoint and remove who you wanted as a director. Normally you should follow the procedure in S.168 of the Companies Act 2006 - call a meeting and pass resolution. You have not done that but this can be ratified by simply placing a resolution (in written form) to ratify these acts. I would note though that by removing Paul you may have exposed the company to an employment claim - but the onus would be on him to prove he was an employee which may be difficult especially if he wasnt paid a salary or didnt have an employment contract.
b) If this is legal is it advisable or should Jonathan remain as director and shareholder, or does not matter?
- it does not matter you have done what you have done, you may as well avoid any changes - if the company goes into liquidation all the directors over the last couple of years will have to fill in a questionnaire anyway. Whoever is directos must be mindful not to carry on trading the company knowing it is insolvent as this can cause personal liability for the company debts. - See s.214 of the Insolvency Act 1986 - wrongful trading.
QUESTION 2.
Are we legally allowed to refuse permission to Paul to remove the items he claims are his personal property until insolvency solicitors are engaged?
- You have hit the nail on the head here. You need to protect yourself and the Insolvency Service generally accepts that the best way a director can protect themselves from personal liability is to take advice from a qualified professional and follow it. You can then use this as the basis of a defence if anyone levies allegations against you under the Insolvency Act 1986. An example of this would be if you started giving Paul company property this could be deemed a preference under S.239 of the Insolvency Act 1986. I would only return his personal property if you can absolutely and unequivocally be certain the company has no claim on it.
QUESTION 3. I was told that we are obliged to report this whole matter as possible gross misconduct to the Insolvency Service, Investigations and enforcement.
a) Are we obliged to report this to them? - it depends what you are looking to report - your main obligation is not to trade the company knowing it is insolvent and therefore prejudice the creditors. Before reporting anything I would go and take advice from an Insolvency Solicitor about either winding this down or transferring the company to Paul - this could be an option as long as he indemnifies you against any claims.
b) If we do that, and if this results in an investigation by HMRC , to your knowledge, is it likely that they will go through the entire trading history of Belum Ltd? _ if the company goes into Insolvency then you can guarantee they will look at why.
c) Are they also likely to go through the other businesses of Jonathan and mine? I know they CAN but just wondering how usual it is or what provokes this. We believe our other businesses are in order, but naturally no one likes to be investigated. - A liquidator has wide powers to investigate all those connected with an insolvent company - that said they cannot use this as a fishing exercise, they would have to have a very good reason to start nosing around your other affairs - for example if either of you have taken assets from the company to detriment of the creditors.
Please do not hesitate to contact me if you would like to discuss any of this further.
Kind regards
AJ
Alex J. and other Law Specialists are ready to help you
Customer: replied 2 years ago.

Hi Alex,

Thank you so much. That is so clear, easy to understand and useful. if that's ok I will just discuss with my partner before concluding in case he anything else he wishes to ask.

regards

Sharelle

Expert:  Alex J. replied 2 years ago.
No problem.
I am just leaving my computer now but will be back at 2pm. If you revert to me over the weekend I may take a little while to respond.
I look forward to hearing from you.
Kind regards
AJ
Customer: replied 2 years ago.

Thank you very much Alex, we are very happy with your comprehensive reply and suggestions. We are now in contact with insolvency practitioners and moving the matter forward. Thank you very much.

regards

Sharelle and Jonathan

Expert:  Alex J. replied 2 years ago.
Hi,
No problem.
I wish you the best of luck.
Please do not hesitate to contact me if I can assist any further.
Kind regards
AJ