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JGM, Solicitor
Category: Scots Law
Satisfied Customers: 12071
Experience:  30 years as a practising solicitor.
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In August 2015 my brother started a limited company and

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In August 2015 my brother started a limited company and registered me as one of the appointed directors with companies house. In August 2016 he was sequestrated and also signed an agreement with the Trading Standards Dept not to act as a manager, director or as anyone with a"special relationship" within a company. He asked me to become a director in September and I took over the running of the company at the beginning of this year. I have subsequently discovered that my brother actually resigned 6 months after the company was formed without my knowledge leaving me as the sole director also without my knowledge whilst continuing to run the business. It's a total mess. No books, no accounts, no systems... Nothing. It as taken me this long to get to the bottom of the mess we are in. Although wages have been paid he has never made any tax returns, the company is registered for VAT but it has never been paid and no PAYE or NI has been paid. We did have bills outstanding to suppliers but I have managed to clear those since I took control. However I dread to think what is owed to HMRC and we will never be able to catch up. Logic would say to liquidate but we have over 30 customers scheduled for installation in the next few months and have Enquiries for orders. If we liquidate all the scheduled customers would lose their deposits. I have taken advice from as accounts specialist who has advised that I could resign as a director now and eventually HMRC would issue a winding up order eventually and that I should write to Companies House advising them of the discrepancy in dates regarding directorship. In a perfect world I'd like to walk away from everything but realistically what I want to do is to do as advised by the accountant and cease trading but open a new company which will trade and register under a totally new name to honour the contracts we have (the company fits bathrooms and kitchens) can you advise if this is legal and viable. I know HMRC will be out of pocket but at least individuals will not be losing the thousands paid as deposits. Additionally the company has a staff of 9 people who will be out of work if I close but if I set up a new company they would all retain their jobs. The current company has a turn over if approximately 750,000 per year and has the capability to increase that if run properly. Additionally my brother acts as sales man for the current company which he is good at. Would deem plotting him jeopardise the new company in any legal way. He would have no control or input into the running of the new company and would be responsible for selling only Please advise the best legal way forward from this mess

If you transfer assets from one company to the other you run the risk of any liquidator pursuing you personally for a contribution to the debts of the company. In addition the liquidator could report you to the DTI which could apply to the court for a disqualification order barring you from being a director of any company in the future. I do not recommend that you do this unless the new company can operate without taking a transfer of assets from the old. It would be better if you could trade out of the current situation by fulfilling the order and getting as much in as you can. Then if you have to liquidate at least you have done everything you could have done to preserve the company and fulfil the orders. You do, however, have to protect your own position and by transferring assets to avoid HMRC debt you are placing your personal position at risk. I hope that helps. Please leave a positive rating so that I am credited for my time.

Customer: replied 1 year ago.
The company has no assets. Premises are rented and vans are on a lease agreement. The account balance is 2000£. If I set up a new company it would be starting from scratch to fulfil the contracts of the other company to avoid people losing their money. It is impossible to trade out of the situation. If your advice would be not to set up a new company then the old company will have to fold regardless.

You mentioned deposits. What happened to them? And how do you expect to fulfil orders without working capital? I appreciate you haven't given me all the information. I am just warning you of certain consequences that could arise in certain circumstances. If you want to give me all the information and seek more detailed information them please feel free to post a new question with a reasonable deposit and I will look at it for you.

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