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Company doesn't exist

What happens when company doesn't exist

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This isn't an accounting question, its law; and it doesn't affect me at all personally but I'm interested if anyone has experience of this.

My firm has... well... had... a client. Limited company. They failed to provide any records on time. We warned and warned. Eventually they got struck off for not filing. HMRC didn't notice or object. Wasn't the first year of trading.... HMRC just failed to notice.

The former client sells items online (no shop). Place your order, it gets delivered to your door etc.

After strike off, they've continued to trade (why the bank account hasn't been frozen I've no idea - its not my original client, I just heard on the grapevine - so maybe the 'company' bank account was in a personal name or something). Money taken, goods delivered etc.

So, if I went to their website and ordered something, who am I contracting with? It can't be the company, so who is it? A former director personally? Or the name on the bank account? If goods delivered where faulty and needed returning, how does this work? If I needed to sue someone, who would I sue? How would I know who to sue? The company website still suggests you are contracting with company 12345678, even though 12345678 doesn't exist anymore.

Just an interesting question on this Tuesday afternoon.

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By Roland195
14th Sep 2021 17:09

I have came across this a few times where a company struck off for dilatory filing of annual returns (as they were in those days) continued to trade afterwards for years, treating it a basically been absolved of all liability to tax.

The bank account used was definitely in the company name & I am afraid I have no idea of what became of them as we obviously had to disengage.

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By I'msorryIhaven'taclue
14th Sep 2021 20:43

They'll be trading online via Paypal or Stripe or similar, and will simply have diverted the funds inflow to their alternative bank account (ie the directors' pockets).

There must be the most outsized most whacking hole in the economy from people trading through dodgy / going-going-gone limited companies. For the small percentage of the population who've discovered how to milk that to their advantage, not to mention those who Phoenix, I see no sign of authorities catching up with you anytime soon.

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By kenny achampong
15th Sep 2021 08:10

Exactly and well put. I made the same point last week. I have no doubt thousands of trading companies have never paid any taxes. Why does nobody in government or HMRC do anything about it ? I once did a random selection of 20 companies formed two years previously and found 5 had never filed anything and been struck off. Obviously no idea how many had traded, but surely it wouldnt be that hard for company bank accounts to be registered with HMRC and if a bank had been opened, put a stop to the strike off. But they're probably too busy with MTD to actually do something meaningful.

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By I'msorryIhaven'taclue
15th Sep 2021 09:58

Well 40 years ago when we first came across Del-boy and his cash business ("no income tax, no V.A.T.") that really was the way hundreds of thousands - I want to say millions - survived on the black economy.

Nowadays it's limited companies that aid and abet the black economy. I have one company client which we believe might have breached the VAT threshold in 2017 but which hasn't submitted a CT return, and neither has it filed accounts at Companies House, since 2018. Every time the Registrar puts the wheels in motion for strike-off the director himself objects and everything is put on hold. It seems it's still only Fools and Horses, only with a slight change of lyrics ("no corporation tax, no V.A.T.")

I know of another company that imported foodstuffs but filed non-trading accounts for many years, even though it was supplying a major supermarket. The director was even a member of the local hunt - talk about white-collar crime!

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Replying to I'msorryIhaven'taclue:
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By Tax Dragon
15th Sep 2021 10:33

CFA 2017 could expose the supermarket to terminal consequences if that happened now.

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By I'msorryIhaven'taclue
16th Sep 2021 11:06

You kindled my curiosity so I looked him up at Cos House. There were two companies, the last of which was removed from the register around 8 years ago. Both only ever filed dormant accounts.

You'd have expected the supermarket's due diligence checks back up the supplier chain to have exposed such filing omissions, but evidently they didn't. It makes you wonder whether the supermarket would take CFA 2017 any more seriously.

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By Tax Dragon
16th Sep 2021 12:59

What would the supermarket have been guilty of prior to CFA 2017? Seems to me that the crimes that Act introduced did not exist before they were... erm... introduced.

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By I'msorryIhaven'taclue
16th Sep 2021 13:25

Foodstuffs, especially as in this case perishables, have to have their origins checked and diligently logged so that outbreaks of anything from salmonella to listeria to plain old gone mouldy can be quickly and easily traced.

It seems to me rather lax of the supermarket not to have noticed they had a company that repeatedly filed dormant accounts in their supply chain. But I suppose they must have visited the unit, all spick and span (although processing was outsourced elsewhere), and seen their cheques being banked and imagined all was as it should be.

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By Tax Dragon
16th Sep 2021 14:11

Yeah if I want to know the use by date of the kibbeh, fattoush salad, hummus and baba ghanouj that I've just acquired from my local 'Arrods, I don't go a-hunting the accounts of the Qatar Investment Authority.

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By I'msorryIhaven'taclue
16th Sep 2021 16:21

Well his was a fishy business ;-)

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By David Ex
14th Sep 2021 17:19

Presumably any number of offences being committed but it does appear that just sticking the proverbial two fingers up to "the system" works well and profitably for many people.

EDIT: There are posters on her who give the names of limited companies that no longer or never existed. Not a crime, but an odd thing to do.

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By thevaliant
14th Sep 2021 17:49

When it was raised this morning with the partner (there is time on the clock for my client, Client A, which I wanted to bill but it is described as Client Z - the client Z being the non-existant company) initially said that the manager of the defunct company was trading illegally.

He then realised what he'd said (my firm don't like AML stuff, or submitting SARs) and back pedalled immediately that it probably wasn't illegal and completely above board and we definitely didn't need to report it to anyone.
I just rolled my eyes.

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paddle steamer
By DJKL
14th Sep 2021 17:36

I vaguely remember questions re "holding out" and contract law but memory is a bit fragile re the detail.

Certainly if an individual has acted in a manner such that he/she is delivering what the contract states is to be delivered there might be argued that the individual, if they know/should know the company did not exist, has implicitly taken on personal liability as agent/principal(but can one have agency for an non existent company?)

Another argument might be that by his/her actions the party has homologated the contract as an individual.

In 1985 I might have been able to answer this were it in Scotland, these days I can merely muse. (Also question of void and voidable swimming around in my head re the purchaser)

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Stepurhan
By stepurhan
14th Sep 2021 17:36

IANAL, but I would suspect the people responsible for continuing to run the website would be held responsible.

As you say, you cannot be contracting with a company that does not exist, therefore you must be contracting with whoever is running the business regardless.

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boxfile
By spilly
14th Sep 2021 22:48

You could email them as if from a website designer offering to help as you have noticed they may need to refresh/redo their current site as it has out of date information on it.
They genuinely might just have forgotten to get it changed to whatever business status they are now trading under.

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By Calculatorboy
14th Sep 2021 23:59

If you're sure of your facts there are criminal issues you can easily report.

As a potential consumer as long as I got the goods I'm ok , if not its credit card company who will be my guardian angel .

There are bigger fish to fry

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