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: 3694
Experience:  Solicitors 2 years plus PQE
13113900
Type Your Law Question Here...
Alex J. is online now

Due to some bad accounting advice when my brother and I

Customer Question

Due to some bad accounting advice when my brother and I owned a company, we declared illegal dividends to the tune of £90,000. The dividend was not changed to a directors loan at year end.The company was bought, and subsequently went into liquidation. We are now faced with the liquidator potentially demanding we pay these dividends back.I know I cannot gift money to someone else to hide my available cash, however I have been advised a solution maybe for me to pay of some of my brothers mortgage then take a charge over the property and vice versa.The thinking being that because a charge has no worth until the property is sold then it cannot be sold by the receiver, and once the money is in the hands of the mortgage company, the transaction cannot be reversed.Please advise whether this is possible, or anyother strategies that would have the same outcome
Submitted: 11 months ago.
Category: Law
Expert:  Alex J. replied 11 months ago.

Hi, Thank you for your question and welcome. My name is ***** ***** I will assist you. Has the liquidator issued proceedings against you? How long ago was the company purchased?

Customer: replied 11 months ago.
Hi Alex, the liquidator has not chased us yet. The company was bought in Nov 2015 and went into Liquidation Jun 2016
Expert:  Alex J. replied 11 months ago.

Hi, Thank you. The problem with hiding your money to avoid creditors, is that liquidators have wide powers to unwind any transaction to recover company money. If you paid each others mortgages for a charge, and the liquidator sued you personally and made you bankrupt, they would just enforce the charge. The best way to deal with this is to consider other outcomes (i) Suing the accountant that advised you (ii) can you make it as unattractive as possible for the liquidator to sue you - considering this can you tell me how the dividend was illegally declared? Did you not pass a resolution? Kind regards AJ

Customer: replied 11 months ago.
Thanks Alex. My brother has his wife and kids living with him. Would they enforce the charge and this turf the kids out on the street? We were professionally advised by accountants who drew up the dividends based on a forecast of profits, (all the paperwork was done) which we now know is completely wrong. They are members of ICAEW so have professional indemnity insurance. We are discussing this with them, but it's hard to preemptively sue until the liquidator comes after us??How could we make ourselves unattractive?
Expert:  Alex J. replied 11 months ago.

Hi Thank you. Yes you are correct - it is unlikely they will get an order for sale if there are children under the age of 18 in the house. They way you can make a claim unattractive is if the claim is expensive with no prospect of a return, if the liquidator does not have the money bring a claim then they wont have money to compile evidence. If they make allegations I would only respond if they give you access to the company books for example - this in itself would be an expensive process - you would also get to see what evidence they actually have. This exercise may put them off bringing a claim.