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Company strike off

If a company is allowed by the directors to be struck off for non-filing of an annual return, can those directors be held liable personally for the liabilities of the company?

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By zebaa
04th Feb 2013 18:34

Not usually

Do you want to tell us more?

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04th Feb 2013 18:37

In theory yes, but in most cases they get off

Directors can in law be made liable for the debts of a company if creditors can prove that the company continued to trade while being insolvent and thereby involved the creditor in preventable losses.

The problem here is proving that directors were aware that they were undertaking wrongful trading. Unless someone on the inside is prepared to act as a witness against the directors of the company, or creditors / insolvency practitioners obtain evidence that the directors were trading while insolvent (board minutes, e-mails and other correspondence), then it is almost impossible to prove.

As the directors would be jointly and severally liable for losses, it is to their advantage to stick to a 'party line' that they only became aware of their insolvency immediately prior to closing the doors / calling in an insolvency practitioner, etc.

Probably not what you wanted to hear, but sadly it is the truth. The days when directors would put their hands in their pockets to repay creditors after a company goes bust are sadly long gone. 

 

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04th Feb 2013 19:45

frustrated

I have written letters without number to newspapers making exactly this point about Rangers.

There is no doubt from previous press reports and e mails that the directors were indeed aware of the inability of the company to pay its debts. But, as usual, hidden motives prevented this.

Yet I wonder; if it had been Joe Bloggs ltd, would the outcome have been different?

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04th Feb 2013 20:36

It depends upon the sums due

HUGH W DUNLOP wrote:
Yet I wonder; if it had been Joe Bloggs ltd, would the outcome have been different?

Certainly HMRC won't touch a small company that has gone belly up unless the sums are in the hundreds of thousands and HMRC have evidence of substantial cash / assets of the directors that can be easily seized.

As individual inspectors are no longer responsible for a case-load of companies they cannot be held responsible or accountable if those companies are delinquent or go belly up owing thousands of pounds in unpaid tax, usually VAT and PAYE/NI as that collects in large amounts rather quickly.

Even if categorical proof was handed over to HMRC by an accountant or bookkeeper, unless the sums were substantial, HMRC would ignore it as being not worth the hassle.

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04th Feb 2013 21:24

it depends upon the sums due.

Exactly my point. In the Rangers case this was substantial, so why was no action taken?

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07th Feb 2013 11:32

I have exactly the same situation

Write a letter to the client, try your luck. You never know, if you word it correctly, you could scare them into paying.

Try something like this:

"As a director of <Company> you are required to act according to the General Duties of a director as specified in Chapter 2 of The Companies Act 2006 specifically a duty to promote the success of the company (S172).

Furthermore, the Insolvency Act 1986 specifies that where any debts have been incurred by a company knowing that they cannot be paid can be deemed as Fraudulent Trading (S213). Possible repercussions are being made personally liable for the debts, being fined and/or imprisoned, being disqualified as a director for up to 15 years.

In order to avoid any possible repercussions for failing to meet your duties we expect payment by return."

Alternatively, you could make an application to restore the company to the register under S1029 Companies Act 2006: Application to court for restoration to the register. This will carry a cost which, depending on the value of monies due, may not be the best option.

Best of luck

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07th Feb 2013 12:05

It depends upon the sums due

HMRC have announced that for an outlay of some £7 million in additional tax inspectors, they have gained £75 in tax revenue. Imagine what they could attain by investing £1 billion in competent tax staff who could frame tax law in such a way that no loopholes existed. Provided these inspectors were allowed to work only for HMRC, it would remove any possible doubts that they also worked for accountancy firms, as I feel sure has happened in the past.

None of the tax avoiders could afford to pay staff enough to look for loopholes, and tax income would soar.

Why go fishing for sprat, when more sophisticated equipment will bring in mackerel?

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07th Feb 2013 12:33

Striking Off

The Directors are legally obliged to inform the Creditors when THEY apply for Striking Off. When Companies House activates this, you are left with monitoring the London Gazette. When it's gone, it's GONE. The company does not exist so it has no Directors. Any assets belongs to the Crown.

Trying to re-instate is pretty costly and, even if you did, to what end? Reinstate then get a Judgement followed up by a Winding Up petition.Then you have to encourage the Official Receiver to do something other than let it slip away or, alernatively, pay for an IP to take it on! You really need to be owed a lot.

JI

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By JAADAMS
07th Feb 2013 13:27

I wrote an article covering this ...

... entitled - Directors Duties for Companies in Difficulty.

In the article I wrote...'Despite the protection of Limited liability be aware that directors could be made personally liable for any debts being required to contribute to the company’s assets in a winding up should there be a breach of duty, fraudulent or wrongful trading.  (Insolvency Act 1986 s 213/ s 214 and Re DKG Contractors Ltd (1990)) A director may be liable for unpaid personal PAYE and NI.

 See link:

http://www.accountingweb.co.uk/article/directors%E2%80%99-duties-companies-difficulty/526675 

 

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08th Feb 2013 08:58

JAADAMS

I think you need to focus on "striking off" rather than "winding up". See my note above. "The company ceases to exist".

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