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Abandoned company - where does client stand?

Abandoned company - where does client stand?

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.

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19th Jun 2012 12:22

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.

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By BKD
19th Jun 2012 12:53

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

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19th Jun 2012 12:58

Totally unhelpful post

Yes I understand all that but the post is a request for help not criticism. The client knows he has been hopelessly naive to say the least but if you knew all the facts you may be less scathing.

Has anybody got anything constructive to add?

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19th Jun 2012 13:00

Just the appointment form

Nothing else was signed and he was not a signatory on the bank account.

He did not live up to his legal responsibilities but genuinely didn't know what was happening, even though he should have.

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19th Jun 2012 13:17

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 arse 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?

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19th Jun 2012 13:19

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.

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By zebaa
19th Jun 2012 13:38

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.

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By Tosie
19th Jun 2012 13:43

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.

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By neileg
19th Jun 2012 13:44

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.

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19th Jun 2012 14:03

The horse has bolted

Sorry, posted this before I saw the helpful comments, thanks guys!

 

 

We can't now close the stable door.

George - I'm not rising to your provocative post - you don't have any idea of the facts.

I'm looking for any advice anybody may have for what to do now for God's sake!!!

Approach an insolveny lawyer, write to the official receiver, go on Aweb and make unhelpful comments etc.???

 

 

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19th Jun 2012 14:02

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

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Moonbeam
19th Jun 2012 14:06

Again you have no idea

How about disconnecting their mobiles, not replying to emails and no-one at their home addresses.

Ok David Copperfield hasn't been involved but this is as close to disappearing as I have come accross!

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By Tosie
19th Jun 2012 14:05

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.

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NH
19th Jun 2012 14:09

Thanks Tosie and others

The advice given is spot on and along the lines of what we thought.

The concern from the director is that the suppliers owed £25k via the judgements may have an angle to pursue him personally given that the conduct of the other directors has been questionable to say the least.

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19th Jun 2012 14:22

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!

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19th Jun 2012 14:22

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

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Portia Nina Levin
20th Jun 2012 14:04

Apologies

Sorry, didn't mean to be rude - must have been a bit stressed yesterday! Thanks for all the replies,

 

 

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19th Jun 2012 16:58

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

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22nd Jun 2012 11:35

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.

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22nd Jun 2012 11:44

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.

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22nd Jun 2012 12:30

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)

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Stewie Griffin
22nd Jun 2012 12:41

Yep

David Melia wrote:

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.

 

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22nd Jun 2012 22:49

stress
Its often the little things that get to us the most !

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By Alf
25th Jun 2012 10:06

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.

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