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.
  • Go back-and-forth until satisfied
    Rate the answer you receive.
Ask Ed Turner Your Own Question
Ed Turner
Ed Turner,
Category: Law
Satisfied Customers: 1910
Experience:  Director and Consultant Solicitor (Self-Employed) at Ed Turner LLB Limited
107013918
Type Your Law Question Here...
Ed Turner is online now

I am a director of a company but not a shareholder, the

Customer Question

I am a director of a company but not a shareholder, the other director and only share holder is unresponsive and has moved to Thailand, due to lack of response I started up on my own to make some money as was not taking money out the company to try and ensure debts could be paid. (I spend 80% of my time running the company for no pay, the other 20% working on a self employed basis). The shareholder wants to dissolve the company though we have a Covid loan to pay of £50k. For 2-3 month he has done no work at all to help the business as I have done everything (100% of all the work to keep the business going) He know wants half of the profits of the stuff y I do on my own as he says I have used company resources. I am refused access to the accountant and the only info I have is the EOY publicly available accounts and access to the company bank account. I was paying myself approx £3k per month out of the business, though had a lot of months where I paid myself nothing. It turns out very little has gone through PAYE (I was not in charge of this) so I don't know where I stand to be able to resign as director, if I have liability for the COVID loan and how to organise the Tax on my earnings so I can move on cleanly and with no issues. I really need some advice on this
JA: Where are you? It matters because laws vary by location.
Customer: Poole / Dorset
JA: What steps have you taken so far?
Customer: I have checked companies house to confirm I am not a shareholder only a director. (This only recently came to light). I have requested info from the shareholder on PAYE info and accounts info. (no response). I have had a brief conversation with an accountant who explained that I needed to payed PAYE as not a shareholder.
JA: Is there anything else the Lawyer should know before I connect you? Rest assured that they'll be able to help you.
Customer: No everything explained above
Submitted: 16 days ago.
Category: Law
Expert:  Ed Turner replied 15 days ago.

Hello.   I am Ed, a Solicitor qualified in England & Wales with over a decade’s experience in the legal profession advising clients.

I specialise in Commercial Contracts, Business Transactions, Employment, Dispute Resolution, Personal Injury and Road Traffic Law and shall be reviewing your legal problem today.

Regarding the site’s automatic offer of a Premium Service Phone Call, I shall be delighted to talk with you by phone to discuss your issue in greater detail if you accept the offer.

However, if you do not want a phone call, please cancel the offer for a Premium Service Phone Call and you will not be charged extra.

Expert:  Ed Turner replied 15 days ago.

A Director’s Loan Account (“DLA”) allows a company director to take money from their limited company in a way other than a salary, dividend, or expense.   Any transactions must be clearly recorded, and if you take out more money than you put in, the DLA will be overdrawn, and the director personally will owe their limited company this amount.   If the figure is kept below £10,000, having an overdrawn DLA is not usually an issue.   However, if the company becomes insolvent, the situation becomes much more complicated.

When a limited company goes into insolvent liquidation, the liquidators will consider an overdrawn DLA to be an asset of the company.   Therefore, the director must pay back the money they have borrowed from the company so that the money can be used to repay the company’s creditors.  Unfortunately, directors of insolvent companies are usually financially unable to do this at a time when their company is going into liquidation.

The company’s liquidators may pursue you personally for your overdrawn DLA so any money that they receive from you may be used to pay your former company’s creditors, including HMRC and the Covid Bounce Back Loan.

If the company’s liquidators issue you with a Statutory Demand, then you will have 21 days to apply to Court to set it aside, pay the debt in full or make reasonable proposals for settlement of the debt by instalments and/or in part.   Failing this, the liquidators may petition for your personal bankruptcy so that your assets (such as your house and your car) may be sold to pay the debts of your former company.

The rules surrounding overdrawn DLAs when a company becomes insolvent are extremely complex, as are corporate insolvency, personal bankruptcy, and civil litigation generally.   I recommend that you seek professional advice as soon as possible.

Expert:  Ed Turner replied 15 days ago.

I am sorry that I do not have better news for you, but I must be as honest as possible with you to advise in your best interests.

I hope this resolves your enquiry.   Please revert to me if you require any clarification of my answer to your question and I shall be delighted to assist.

Kind regards

LawyerEd

Customer: replied 15 days ago.
Hi Ed, I am confused as I thought that only Directors who were shareholders could take out a directors loan. Have I go this wrong? Thanks
Expert:  Ed Turner replied 15 days ago.

On what basis did you take the money out of the company: salary or expenses?

Customer: replied 15 days ago.
I have just taken the money out of the company bank account at the agreed amount and I thought everything else was dealt with by the accountant. It looks like the accountant only put the minimum through PAYE so there is a lot I have taken out above this. This was just withdrawn under the category directors wages. The sole shareholder of the company is unresponsive and I do not have access to the accountant.
Customer: replied 15 days ago.
However I have access to the company account so can see what I have taken out and can get what I have paid in PAYE through the .gov / Government gateway
Customer: replied 15 days ago.
Previous advice I was given is that if I am not a shareholder then I can only receive wages as PAYE. I am a director on Companies House but not a shareholder.
Expert:  Ed Turner replied 15 days ago.

I believe that the liquidators will treat the monies as unsecured, interest free and no repayment term loans.  Therefore, it is a DLA in all but name.   However, I recommend that you speak to an expert tax adviser as this is outside the scope of the service that Just Answer can provide.