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Ash
Ash, Solicitor
Category: Law
Satisfied Customers: 10916
Experience:  Solicitor with 5+ years experience
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I have a long winded question . I am a 50%

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Hello. I have a long winded question for you. I am a 50% shareholder of a small life assurance business. The other 50% shareholder is also the sole director. We do not have a shareholders agreement or any other contact. The relationship is now strained and litigation may follow soon. The business works by both of us selling life assurance policies to the general public. the insurance companies in return, provide our company with commission equal to 24 months premiums, therefore if the client cancels the policy before, then the commission is repayable to the insurance company. Simple format The director took on a self employed broker 2 years ago, who sold a lot of policies, we paid him and he left the country and all of the policies cancelled, which the company had to pay back as it was liable. This amounted to £100,000 loss to the business. To cover this and to ensure that we were both paid, the accountant listed this debt as 1) a loan to me as a shareholder 2) loan to the director. These monies have been outstanding for over a year now, are still listed as loans and the inland revenue have taxed us on these loans at the usual rate which is repayable to the company once the loans are repaid. The director has decided to cancel my ability to work at the company. As he is the sole director, he has instructed all of the insurance company's, not to accept my agency. Since this happened, I have had insurance cancellations of approx. £48,000. My questions are these; The director is demanding the return of this £48,000. Am I liable for this? I am a shareholder and therefore am I responsible for company debt and secondly as I also worked at the company to sell products on a self employed basis (a broker) without any contract or personal guarantee, am I still liable? The director is demanding that I pay the £50,000 loan that I have on the accounts, back to the company? Can he do this, where he also has the same debt that I do? Perhaps he is trying to bully me? Lastly, there is a tax bill coming up for corporation tax. He says I owe half of this. Am I liable for this as a shareholder personally, or is the company liable for this? Thank you so much XXXXXX XXXXXXX

Submitted: 1 year ago.
Category: Law
Expert:  Ash replied 1 year ago.

Hello XXXXXX my name is ***** ***** I will help you. I assume the £48,000 was paid to the company? As to repayment of the loan do you or he have a directors agreement?

Customer: replied 1 year ago.

The company suffered a loss that year and we were still paid in full for the polices we sold. Therefore, the company I assume had to pay this £48,000, but this was put as a loan against me as was the same with the other partner/ director for his £48,000.

We do not have a directors loan agreement or shareholders agreement.

I would speak by telephone but I cant do this today. Therefore, if we can talk this way that would be preferable.

Expert:  Ash replied 1 year ago.
Sure. Were the policies sold through the company?
Customer: replied 1 year ago.

Yes, the policies were sold under the company

Expert:  Ash replied 1 year ago.
Ok, on what basis does the director say you are personally liable?
Customer: replied 1 year ago.

To be honest I am not sure if I am personally liable for this. perhaps you can advise. I assumed I was, as the company accounts show the following;

The last years accounts 2013-2014 state this on the last page;

Directors and shareholder

Amount due from related party at the balance sheet date £44,545

Shareholder (me)

Amount due from related party at the balance sheet date £44,545

Expert:  Ash replied 1 year ago.
Ok,Knut it was only transferred as a debt to you by the other director?
Customer: replied 1 year ago.

I don't know what 'knut' means, sorry.

I believe, the accountant said back then, that we had both taken out too much money. To keep the FCA happy with the ruling that we had to keep a 5% profit within the business, the accountant put these loan accounts on our accounts for that tax year. Does that make sense?

Expert:  Ash replied 1 year ago.
Sorry that was meant to read it.......
You are not liable for the £48,000. It is a debt of the company as it was sold through the company. As a shareholder you are not liable for a company debt.
Agin in terms of corporation tax as a shareholder you are not liable, it belongs to the company. With the £50k loan he can ask but without any Directors agreement he can't just make it repayable upon demand especially if his is still outstanding.
Can I clarify anything for you about this today please?
Alex
Customer: replied 1 year ago.
Your service is outstanding and very quick. I do have one last question.
As an example, if I wrote an insurance policy for a client, under the ltd company, who received the commission which I then paid to self; if this policy then cancels and the ltd company has to pay the commission back under contract to the insurance provider, am I then personally liable to pay this back to the ltd company.
As mentioned, I do not have any agreement or personal guarantee signed and also I have no contract that holds me liable for chargebacks to the ltd company for commission.
Thank you so much for your help.
Expert:  Ash replied 1 year ago.
No.
It was paid to the Ltd xo and not you. You are not liable in any way.
Does that help?
Alex
Ash, Solicitor
Category: Law
Satisfied Customers: 10916
Experience: Solicitor with 5+ years experience
Ash and other Law Specialists are ready to help you
Customer: replied 1 year ago.

Perfectly. Have a great weekend. I will be ☺

Customer: replied 1 year ago.

I have one more Q. With my shareholding aside, can the company chase me for any debt commissions paid to me as an insurance broker, where the company has had to pay the money back to any insurance firm due to client insurance policy cancellation. I do not have a contract with the company. I understand the company is solely liable to pay the money back to the insurance firms, but in turn, can the ltd company then chase me, as I was the person who actually received the commissions after it was paid to the ltd Co from the insurance firms.

Sorry, I just lastly needed to clarify this point, as although I have received divs as a shareholder, I also sold insurance products to my clients under the companies name for commissions.

I'm probably going over old ground but just needed confirmation. Thanks

Customer: replied 1 year ago.

Thankyou

Expert:  Ash replied 1 year ago.
No, there is no agreement.
Alex
Customer: replied 1 year ago.

Can you clarify, that if the business fails and is being wound up, whether HMRC can come to me personally for the monies mentioned earlier (listed again below) and can these monies be demanded in full, immediately by HMRC?


The last years accounts 2013-2014 state this on the last page;



Directors and shareholder

Amount due from related party at the balance sheet date £44,545



Shareholder (me)

Amount due from related party at the balance sheet date £44,545

Expert:  Ash replied 1 year ago.
If the is a Directors loan, HMRC will want the tax on that.
Alex
Customer: replied 1 year ago.

Mine was just a loan to me as a shareholder as im not a director. There is no written agreement for this. The tax to hmrc has already been paid as the loan has been outstanding for over 12 months. Could an insolvancy practitioner on company winding up, ask me to pay this back, to offset against any other debts the limited company may have?

Expert:  Ash replied 1 year ago.
Potentially yes as you are a debtor.
Alex
Expert:  Ash replied 1 year ago.
Hi
I am just following up to see if there is anything else I can help with?
If you have not done so already might I ask you to rate my answer before you go today please, the button should be at the bottom of the screen.
If you need more help please click reply.
Alex
Customer: replied 1 year ago.

I hope you still have the info I supplied before. I have today received a letter from the director stating, that he believes I do owe the £48,000.

This is business where the clients had cancelled policies and the company has paid these commissions back. You said to me before about this that I am not liable for the £48,000. It is a debt of the company as it was sold through the company. As a shareholder you are not liable for a company debt.

In the letter I have received, the director says that the debt occurred because transfers have been made to my own personal bank account in excess of that due to me as net pay and dividends.

He also states that If I do not pay this to the company in 4 weeks, that when the next accounts are due to be completed next month, that he will document the £48,000 as a loan to me on the Ltd co accounts.

Can you clarify my position here?

Thank you

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