Active company proposed to be struck off

Active company proposed to be struck off

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Hi, there is this situation that I hope someone can help me on. There is this potential client, who is the head chef of a restaurant owned by a ltd co. The restaurant is thriving. The shareholders and directors are the head chef and her partner. Her partner has always been the one doing the paperwork while she's the one running the restaurant.

Her partner has recently left the country (for good) and she has recently been receiving letters from Co Hse stating that the company is being proposed to be struck off. A quick check at the website shows that no accounts been filed since incorporation!

So, what will happen to the 2 company cars and their respective loans that are still outstanding? can she change ownership+debts onto herself personally and avoid the cars being frozen? what will happen to her corporation tax affairs? if the company is struck off, will the HMRC still accept her CT returns? what is the best and cost efficient way to handle this situation? her partner also left her with lots of other trading debts that she now repays using the income from the restaurant.

I'd appreciate any view/suggestions.

Thank you.
J
J

Replies (7)

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By User deleted
07th Mar 2007 10:24

How about the 'transfer'..
Thank you for your comments, Steven and Euan.

You didnt mention about the assets and liablities getting 'transferred' to her on her personal capacity, does this mean its not even a possibility?

I apologize if my question seems silly, I dont have much experience in this kind of situation.

Thanks again.
J

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By User deleted
08th Mar 2007 10:34

Thank you all.
I really appreciate your comments.

In my defence, I am aware of how little experience I have in active company being proposed for removal (and have admitted it earlier) and I know it'll be unethical to advice anybody if I dont have sufficient knowledge in that area.

I have indeed arrange a meeting with a solicitor to assist this woman but I am glad to say she returned to say that she wants to file in all overdue accounts and own up to the penalties.

There is nothing unusual about paying trade debts with trade income, but in her case previously earned income that was supposed to have paid off previous debts was not used to settle those debts and seemed to have been 'lost'. So she is now paying old and current debts with current income.

Anyway, I really appreciate all your comments and glad to have found this website.

Cheers
J

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By AnonymousUser
06th Mar 2007 13:23

Phone Companies House
Commit to a timeframe to get the accounts / annual returns up to date and they will almost certainly postpone the dissolution. They can even reverse a dissolution if you beg! Obviously there will be meaty penalties by now for failing to file on time.

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Euan's picture
By Euan MacLennan
06th Mar 2007 13:52

Depends on the CT
I entirely agree with Steven on the best way to proceed.

But to answer your questions - when a company is dissolved, its remaining assets pass to the Crown, unless perhaps they have been pledged as security for a loan, and all its liabilities cease. This means that the Revenue could not pursue the company for any corporation tax that might be due, never mind the CT returns. That is why the Revenue almost always objects to a proposed dissolution when the Registrar publishes the required 3 months notice.

If the tax payable and the Companies House and Revenue late-filing penalties together exceed the equity in the cars, the most cost efficient way to proceed would be to allow the company to be struck off, having first extracted all the money from the company.

But you would not recommend that to a client ......... would you?

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Euan's picture
By Euan MacLennan
07th Mar 2007 13:05

Who has control ?
You did not say in your original question, but do we take it that the absent ex-partner is still a 50% shareholder and remains a director? If so, he has to agree with decisions made by the company, particularly with regard to the transfer of its assets, and he would be entitled to 50% of any dividend whether in cash or in kind (in specie). The first thing your potential client needs to do is to get her ex-partner to transfer his shares to her, preferably as a gift in order to avoid the need for valuation and stamp duty, and to resign as a director. Your potential client would then need another person as a second officer of the company.

Once she has control of the company, she can continue to trade through the company, but she will need to bring the accounts up to date. If the late-filing penalties would be too much, she might wish to transfer the trade and assets to another company under her control and let the first one go, but as I said before, the Revenue would probably object to its striking off until they had seen accounts and been paid any tax that was due, so she might as well keep the original company.

If she really wants to become a sole trader, she can transfer the trade and company assets to herself personally, but will need the consent of creditors. Trade suppliers may not mind who pays their invoices, but she might find it more difficult to get credit as an individual. If there are HP or loan agreements on the cars, they are probably secured on the cars and she would need to arrange with the finance company for the transfer of both the car and the loan.

I am puzzled by your comment that the ex-partner left her with trading debts that she is repaying using the income from the restaurant. What is unusual about paying the trade debts out of the trade income?

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By neileg
07th Mar 2007 13:27

Tread carefully
I'm a bit concerned that you are contemplating taking on this client when it's clear that your understanding of limited liability companies is rather sketchy. I don't want to sound pompous about this, but you need more than advice from a public forum like this to properly advise your potential client.

Do you have arrangements with another accounting practice or a solicitor for back up assistance? If so, armed with the information from here, you will be able to ask the right questions. Otherwise, out of your depth, you could do harm to your client and to your practice.

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By Chris Smail
07th Mar 2007 17:08

I'm with Neil
I don't understand why you are talking about transfering debt etc. She just needs to get control of the company and run it properly. Will the ex-partner give her the shares?

Given the mess you have was it ever set up properly in the first place? Who actually owns what shares?

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