Dividend on overdrawn account

Dividend on overdrawn account of a company going into voluntary liquidation

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Please, i have a company that is going into voluntary liquidation, the director has paid himself a dividend before the year-end, but currently, the accounts are overdrawn as a result of assets that we fully depreciated and impaired, what is the best approach for director or company at this point?

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By lesley.barnes
20th Nov 2019 10:53

Were the accounts overdrawn when the dividends were paid or were there funds available to distribute? Its difficult to help due to the lack of information. Some figures might help and an idea of creditors, debtors etc. Has the client contacted an insolvency practitioner for advice?

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Lisa Thomas
By Lisa Thomas - Insolvency Practitioner
20th Nov 2019 11:32

I presume it is an insolvent Creditors Voluntary Liquidation, rather than a solvent MVL.

All the Directors need to prepare themselves for a claim from the Liquidators for repayment of any unlawful dividends/DLAs and to negotiate repayment. They should instruct a specialist Insolvency Solicitor to defend them. I can recommend one if you DM me.

Worst case scenario is the Liquidators pursue all Directors (not just the one that took the dividend/s, if there are more than one) for misfeasance and commence recovery proceedings against them.

Depending on the circumstances and size of the claim the Insolvency Services may also decide to pursue the Directors, which could result in a fine or disqualification.

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