dormant company goes to court to sue company?

Question of legitimacy, whether a dormant company can go to court

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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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By Tax Dragon
26th Nov 2022 07:03

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.

Thanks (3)
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By Leywood
26th Nov 2022 08:19

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.

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By adam.arca
26th Nov 2022 08:53

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.

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Replying to adam.arca:
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By StefanZ
26th Nov 2022 12:47

adam.arca wrote:

“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).


Thanks! In GER we say, "you can't ride a dead horse", but the horse is not really dead, just "dormant", but it is still strange story.
Further, in case they will lose, I suppose that they will liquidate Ltd (dormant accounts have only 1GBP) and we won't get reimbursement of the costs for attorney/legal actions.
adam.arca wrote:

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.


What is meant with first part?
On the Invoices was stated, please transfer to following account "FR.... " and account holder is "Company name "at" Company director name", so a private account, which is fine so my lawyer.

When we started cooperation, the UK-Ltd.-Company provided a VAT-ID-nr (was before Brexit) and Reg-nr, and theses numbers are mentioned on the invoices.

It seems to be his second fake company for tax fraud over the last 10 years and we sent an enquiry to Companies House, but no reply, only standard reply, that we will receive feedback within 10 days, which elapsed, maybe they will come back or investigate without our involvement, but my question here was about "active legitimation to go to court when you are dormant".
Thanks.

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By paul.benny
26th Nov 2022 09:42

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.

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Replying to paul.benny:
RLI
By lionofludesch
26th Nov 2022 10:19

paul.benny wrote:

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.

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Replying to paul.benny:
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By Tax Dragon
26th Nov 2022 13:38

paul.benny wrote:

And my learned colleagues here talk of fraud.

OP's word.

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By Hugo Fair
26th Nov 2022 13:04

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?

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Replying to GizmoCat:
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By I'msorryIhaven'taclue
26th Nov 2022 20:40

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?

https://www.gov.uk/check-uk-vat-number

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Replying to GizmoCat:
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By Joe Soap
30th Nov 2022 17:04

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.

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