A individual client of mine was involved with 2 other people as directors of a limited company.
My client had no involvement in the company and was 'convinced' by the others to be a director. Without going in to the intricate details, he genuinely didn't have any part in running the business or working in it and never signed any documents whatsoever.
The company has since got in to financial difficulty and ceased trading with 2 CCJ's totalling £25k with potential winding up proceedings to follow.
The 2 other directors have resigned their directorships, disappeared and left my client as the only director.
Can he resign and abandon the company completely?!
Any advice appreciated, an insolvency lawyer is my next stop.
Replies (25)
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It wasn't me; I wasn't there
When your client was 'convinced' by the others was he advised that he had a duty to exercise reasonable skill, care and diligence?
When all the things that happened that he wasn't a party to brought the situation to its current position, he doesn't seem to have been at all skilful, careful or diligent. There's no need to get the reasonable ruler out.
I do apologise to everybody for oozing so much sympathy today.
At risk of being pedantic ...
he ... never signed any documents whatsoever
Did he sign the form accepting appointment as director? Your comments presumably refer to other documents, relating to the running of the business ... just checking
I'm sorry...
... let me put my point another way.
Were you aware that your client was a director of a company in which he had no active involvement?
If you were aware, did you advise him that the law imposed these duties upon him, such that if it all went pear-shaped, his [***] would be on the line?
If you were aware, but didn't so advise him, would you say that you owed him a duty of care?
I have seen a similar situation
The sales director worked from home and was abroad most of the time. When the company went belly up he asked me if I (late appointee Co. Accountant) would write a letter to the IPs telling them that he wasn't to blame!
I politely but firmly told him that, as a director, it was his JOB to know what was going on and demand the information if it was not forthcoming.
Yes, is the answer to your question
Yes he can resign. What happens next will depend on any assets left in the company, my guess is there will be little or none. In this case a winding up order my not be made and things will have to wait until Companies House gets round to striking the company off. It is also likely you will be offered a legal route which will do the same thing but will cost between two and five thousand pounds. Only the director can say if this is money well spent, but I am a sceptic and suggest a bit of thought is needed.
Hope that helps.
not worth worrying about
If he has no interest in the company and there has been incompetence rather than fraud the company will be wound up and disappear.
if there are no assets the winding up order will be useless and I suspect a threat rather than a reality.
Why worry?
What you are really asking is what are the consequences? He can certainly resign and he will have to lodge the correct form at Companies House but that doesn’t change the history, only the future.
Who would have a right to take some form of action against him? The shareholders of the company but presumably these are the directors that have legged it. If the company is formally liquidated then the liquidator might have grounds to claim breach of fiduciary duty but I’d say this would be pretty unlikely.
So really there’s nothing going to happen. Yes it was daft and he should have been more responsible but I wouldn’t be lying awake at nights worrying.
i very much doubt that they have disappeared
how and when did they resign- you have 2 courses of action realistaically
1. also resign
2. see if you can manage the company and show that you are acting in good faith
Re The horse has bolted
Frankly there is nothing your client can do. An IP will not be interested unless somebody pays him.
Please spell out your concerns as to what your clients concerns are then we can offer some advice.
This is not that such an unusual situation and in practice it will resolve itself unless there is something that you have not made us aware of.
Further apologies
I'm sorry I hadn't appreciated that the answer you wanted was that there's absolutely no chance that the people that are owed £25K can in any way come after the one man left standing, laying the blame for their £25K loss at his door.
No, of course they can't.
How dare the suggest that your client's duty of care extends to them as creditors. How very dare they!
stop being so rude accountant i am trying to help
you have given us precious little information so its very difficult to make a value judgement
without further information
it is possible that the company was trading whilst insolvent if that was the case there is a tiny chance that you client as director could me made responsible and have to make an appearance in county court
I am not sure that we have aswered the op original question
Which I think is can he resign?
My other thought is that a striking off application should be filed if the process has not gotten this far. why? It shows that the remaining director has acted properly.
Resigning
Would not be the technical answer as the director will have failed in his fiduciary duty by jumping ship may even make the situation worse in hindsight. The textbook answer is to approach an insolvency practitioner.
However many of these rules exist only on paper and when we see directors resign, nothing happens.
equally actions for wrongful trading are equally rare especially for small amounts like this.
Document why resignation done, as in no access to company records etc advise companies house company has no directors and they will probably strike off.
Unless someone goes for a winding up order (unlikely) that will be the end of it
and even then
The official receiver does not have the resources or the will to pursue these cases (which is why it works so well for the genuine fraudsters)
I would not hang an innocent man by making a confession.
I presume that the company has stopped trading and there is not a question of fraudulent trading.
I hope that made come sense and was helpful but have to say George is not wrong either.
Are you sure the last man standing can resign?
I seem to remember from a long time ago that you must have at least one director, so the last one cant resign?
I doubt anything will happen here, there are no assets(?) there is nothing your guy has been involved in(?) No money to pay an IP(?)
I have a similar situation where we had a (very) agressive director who stopped the other directors/shareholders having any say in the business. It imploded with loads of debts and no one is being pursued for anything.
He is probably worrying about nothing (if he has told you everything) and i would wait and see what happens. It isnt trading so cant be trading whilst insolvent.
(Sorry about all the parentheses)
Yep
I seem to remember from a long time ago that you must have at least one director, so the last one cant resign?
But companies house will accept and then hurry up dissolution if no directors.
bizarre I know but that's companies house for you.
They will take the least work method and are aiming for full compliance so defaulters must be brushed under the carpet quickly otherwise the targets will not be met.
Tell him to resign
I have also seen companies where all the directors have resigned. Companies House will eventually wind it up due to non-filing of annual return/accounts.
I would suggest that he resigns ASAP. It won't necessarily protect him from the consequences of the past but at least it stops anything new being added to the list of things he might be responsible for.