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JGM
JGM, Solicitor
Category: Law
Satisfied Customers: 10089
Experience:  30 years as a practising solicitor.
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Company A has a net worth of 1.4M and wholly owns company

Customer Question

Company A has a net worth of 1.4M and wholly owns company B that has a net worth of 65K.
Although Company B has an invoice discounting facility, Company A makes various working capital loans to Company B to reduce interest on facility. Loan values vary but have been as much as 0.75M.
Over the last month Company A has called in all loans from Company B. The director have done this in advance of a meeting with Accountants this week to discuss removing Company B from the ownership Company A.
Company B bought an EBT (employee benefit trust) in 2009 and the director believe that HMRC will shortly issue an APN (advance payment notice) for circa 200K. in respect of this EBT. The directors would hope to be able to negotiate satisfactory repayment terms with HMRC.
The directors would like to know how they stand should it not be able to negotiate acceptable terms with HMRC and HMRC pursue for payment. Winding up order etc.
If HMRC successfully wind up Company B could they pursue Company A for the balance of the debt not realised from Company B
Submitted: 9 months ago.
Category: Law
Customer: replied 9 months ago.
**** last line should read ****
If HMRC successfully wind up Company B could they pursue Company A or the Directors personally for the balance of the debt not realised from Company B
Expert:  JGM replied 9 months ago.
HMRC could not pursue company A. Company B stands on its own and its limits liability precludes personal liability on the part of the owner, company A and that is the case with the directors of Company A as well. A liquidator could only pursue the directors of company B if those directors had illegally removed assets from the company in an attempt to put those assets out of the reach of the liquidator and thus the creditors of the company. I hope that helps. Please leave a positive rating so that I am credited for my time.
Customer: replied 9 months ago.
btw - the director are the same for each company. - - It's interesting that you specifically referred to ""directors had illegally removed assets"" because my concern is that HMRC will try and claim that the directors removed the inter company loan because they knew he APN was on it's way. Now a loan is not an Asset it's a liability - so could you confirm that you would not anticipate HMRC having a problem with us introducing and removing working capital from company B. Would this still be the case after the APN has been issued and becomes a formal debt on company B ? - thanks for your helpCompany A makes various working capital loans to Company B to reduce interest on facility. Loan values vary but have been as much as 0.75M
Expert:  JGM replied 9 months ago.
You refer to the holding company "removing" the loan. However the other way of looking at this is that the company B has conferred a preference on company A by paying it back in the knowledge that HMRC were about to serve the APNs, especially where the companies are connected. However, the preference is only crystallised on a formal insolvency. See online sections 239 and 240 of the Insolvency Act 1986. To be safe the company B would have to avoid insolvent liquidation or administration for 2 years following the repayment of the loan to company A.
Customer: replied 9 months ago.
Your saying the problem lies with the 2 directors being directors of both companies - do you not stand by your original reply ?
Customer: replied 9 months ago.
Over the last month Company A has called in all loans from Company B circa £730K. The Directors have done this in advance of a meeting with Accountants this week to discuss removing Company B from the ownership Company A. Does your 2 year period still apply in these circumstances ?
Expert:  JGM replied 9 months ago.
No, it's nothing to do with the directors being the same. It's the possibility of a challenge by any future liquidator (not HMRC) to a preference in favour of company A. The future severance of these companies would be irrelevant. The two year period would apply in those circumstances.
Expert:  JGM replied 8 months ago.
Let me know if I can help you further with this. Can you also remember to leave a positive feedback on the system so that the site credits me for my time. Thanks for using JustAnswer.

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