Can a dormant company goes to court to sue another company?
We are a limited liability company in Germany. We have paid 300k to a supplier from UK (Ltd) over 2,5 years period. There is a dispute over a last balance payment of 6k. Now the supplier from the UK has sued us in GER by court. In the course of the legal proceedings we became aware of the fact that the company has been dormant since its foundation and only deposited dormant-accounts for the period of time, i.e. the 300k cannot be found in the balance sheets of the (dormant) company. Their invoices showed a bank account in France. Clearly tax fraud to me, but the court in GER doesn't care and would even continue to require me to make the payment to France if we lost. Hence the question of legitimacy, whether a dormant company can sue at all.
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If the court doesn't care about that, it won't care about the views of a few mostly anonymous respondents in this forum. (Why ask us, btw, rather than your attorney?)
If you are right about the fraud though, HMRC would care.
Your question is a legal one, so not for this forum.
Your due diligence should have picked this up sooner, ie before contracts were even completed. Did you even contract with a limited company?
If you suspect tax avoidance report it.
There is plenty of room for meaning lost in translation here between jurisdictions. “Dormant” in the UK simply means there are no transactions to record (broadly the company law definition) or that the company isn’t trading (broadly the tax law definition). A dormant company is still a legal person and I can’t see why it couldn’t be a party to legal action (but I’m not a lawyer).
The much more interesting question is what has happened to the £300k. Has the UK company been acting as an undisclosed agent for another and, if so, is that a breach of contract or an act of bad faith? Why would a UK company have a French bank account? Not impossible but 7nlikely on the face of it.
From what you say, the only amount in dispute is 6k.
As a UK company, I would hesitate to take action in a foreign court to recover a debt of this size - too many things that I do not understand (language, legal system). Even with a customer in UK, legal action is very much the last thing I would do. If there is a real dispute, I can be less sure of winning in court.
I am surprised this has got to the stage of court action. Companies usually send many requests for payment, warning letters before court, etc. Have you had discussion about the debt, the reasons why you have not paid, etc? Even now, I would be trying to agree a solution. You could easily spend 6k or more on fees.
The question of whether the company has legal capacity to go to court is not helpful - even if you spend money successfully arguing this, the debt/dispute does not go away.
And my learned colleagues here talk of fraud. This may not be the case at all. Multinational companies often have complex operating arrangements where payments are collected in a third country.
And my learned colleagues here talk of fraud.
A lot of folk on here have too little excitement in their lives.
@OP - Who knows? But I'm pretty sure you won't get a definitive answer on here.
Having ascertained that ... this is a legal question ... and this is not a forum for lawyers ... and that a lawyer would require much more information before even making a comment ...
Nevertheless, a thought occurs.
If payments were made by OP's company to the private account of someone (who happened to be a Director of a Company), but not to that Company ... then what (if anything) was the contractual relationship with that Company?
If there was no contract with the Company (dormant or otherwise), then it would seem that the wrong trail is being followed?
Agreed, if a dormant company sues or is sued then it may simply cease to be dormant.
OP, have you tried entering the VAT number into the UK VAT checker to see whether it tallies with the company details on the invoices you paid?
A company is called dormant by Companies House if it’s had no ‘significant’ transactions in the financial year. If it has had sales of 300k over 2 years or so it is not dormant.
If it has filed accounts at Companies House stating it is dormant when it has had sales of 300k those accounts are incorrect.
If the company is really owed 6k there will be a debtor in the balance sheet - and something on the other side.
There may not be fraud but there is something very odd and probably not right.
HMRC may well be interested.