Is this a case for pragmatism ??

What would you do ??

Didn't find your answer?

The  sole director/shareholder of a limited company client whose accounting information has always been in a mess has just had a stroke and is not compos mentis

The last set of accounts filed were to 30/06/19. No accounting information provided for the year to 30/06/2020 despite chasing The company hasn't traded since June 2020, has never owed or paid any CT. VAT is a refund due of approx £400 ( long outstanding), the bank account has a balance of £340. there are no creditors or DLA

What do we do apart from him resigning as a director and the company being struck off by Companies House. We cannot file a DSO1 without preparing acccounts. Meaningful accounts cannot be filed as the director is not capable of providing the necessary information and there is no chance of reasonable fees being paid

 

Any thoughts anyone ??

 

Replies (29)

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By Hugo Fair
22nd May 2021 14:41

"sole director/shareholder of a limited company" - and presumably also the sole employee?

And, without intending to sound heartless, you say he "has just had a stroke" but go on to say that "company hasn't traded since June 2020" (up to when last accounts filed) ... so how can you be sure there was no business activity between 1st July last year and whenever client suffered the stroke? [FWIW it's not the potential activity in itself of which I'm thinking, but the possibility of resultant unknown creditors].

Finally, does the company have a separate Secretary?
I believe, without checking all the details, that when a sole director resigns (without appointment of a replacement) the company is in breach of the Companies Act 2006 and could receive a direction from the Secretary of State to appoint directors.
If the company fails to comply with that direction, it commits an offence together with every officer of the company who is in default - and each may be liable to a fine ... although this does not extend to the director who has resigned.

I've not attempted to answer your core question - but you did ask for any thoughts.

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Replying to Hugo Fair:
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By bernard michael
24th May 2021 08:59

Hugo Fair wrote:

"sole director/shareholder of a limited company" - and presumably also the sole employee?

And, without intending to sound heartless, you say he "has just had a stroke" but go on to say that "company hasn't traded since June 2020" (up to when last accounts filed) ... so how can you be sure there was no business activity between 1st July last year and whenever client suffered the stroke? [FWIW it's not the potential activity in itself of which I'm thinking, but the possibility of resultant unknown creditors].

Finally, does the company have a separate Secretary?
I believe, without checking all the details, that when a sole director resigns (without appointment of a replacement) the company is in breach of the Companies Act 2006 and could receive a direction from the Secretary of State to appoint directors.
If the company fails to comply with that direction, it commits an offence together with every officer of the company who is in default - and each may be liable to a fine ... although this does not extend to the director who has resigned.

I've not attempted to answer your core question - but you did ask for any thoughts.


The company was operating a pub ( badly) and when Covid hit the director paid off all creditors and closed the pub. I'm told by his wife that they haven't had any chasing letters so am assuming the information is correct
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Replying to bernard michael:
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By Hugo Fair
24th May 2021 13:31

I'm not disagreeing with your 'pragmatic' approach ... just pointing out 'thoughts' as you requested.

Presumably if it was a pub then he had employees (pre-closure), so there is a PAYE scheme? And no RTI filings have probably been made for a while? So penalties stacking up?

And you didn't say whether company has a separate Secretary (who could be liable for a fine)?

And, although I'm guessing it's unlikely they claimed any, it's worth asking the wife whether the business received any covid-related grants?

It does sound horribly like the couple have got more than enough bigger concerns than this right now, but you asked for thoughts on potential issues ...

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Replying to Hugo Fair:
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By bernard michael
24th May 2021 13:59

Hugo Fair wrote:

I'm not disagreeing with your 'pragmatic' approach ... just pointing out 'thoughts' as you requested.

Presumably if it was a pub then he had employees (pre-closure), so there is a PAYE scheme? And no RTI filings have probably been made for a while? So penalties stacking up?

And you didn't say whether company has a separate Secretary (who could be liable for a fine)?

And, although I'm guessing it's unlikely they claimed any, it's worth asking the wife whether the business received any covid-related grants?

It does sound horribly like the couple have got more than enough bigger concerns than this right now, but you asked for thoughts on potential issues ...


At the end staff consisted of himself, wife & unpaid daughter. The PAYE system was up to date and taxes paid. No grants applied for
No secretary appointed
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Replying to Hugo Fair:
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By bernard michael
24th May 2021 09:00

Hugo Fair wrote:

"sole director/shareholder of a limited company" - and presumably also the sole employee?

And, without intending to sound heartless, you say he "has just had a stroke" but go on to say that "company hasn't traded since June 2020" (up to when last accounts filed) ... so how can you be sure there was no business activity between 1st July last year and whenever client suffered the stroke? [FWIW it's not the potential activity in itself of which I'm thinking, but the possibility of resultant unknown creditors].

Finally, does the company have a separate Secretary?
I believe, without checking all the details, that when a sole director resigns (without appointment of a replacement) the company is in breach of the Companies Act 2006 and could receive a direction from the Secretary of State to appoint directors.
If the company fails to comply with that direction, it commits an offence together with every officer of the company who is in default - and each may be liable to a fine ... although this does not extend to the director who has resigned.

I've not attempted to answer your core question - but you did ask for any thoughts.


The company was operating a pub ( badly) and when Covid hit the director paid off all creditors and closed the pub. I'm told by his wife that they haven't had any chasing letters so am assuming the information is correct.
There is no secretary appointed
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By Paul Crowley
22nd May 2021 15:52

The only decision maker unable to make a decision.

I would do nothing. Only risk is late filing.

Easier than defending doing something that with 20:20 hindsight someone decides was wrong.

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Replying to Paul Crowley:
ALISK
By atleastisoundknowledgable...
22nd May 2021 17:26

+1

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Replying to Paul Crowley:
the sea otter
By memyself-eye
24th May 2021 08:13

+2,3 and four!

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By williams lester accountants
22nd May 2021 22:50

Should have had a lasting power of attorney put in place for just such an eventuality......

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Replying to williams lester accountants:
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By Paul Crowley
23rd May 2021 01:11

For the last 18 months we have pressed all companies to get something in place for this where there is only one director. Harder on the companies with employees. Make sure there is someone who can operate the bank account. Some have responded, but not all.
Death of a sole director, sole shareholder means bank account frozen very quickly. Months to get sorted out

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Replying to williams lester accountants:
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By bernard michael
24th May 2021 09:02

williams lester accountants wrote:

Should have had a lasting power of attorney put in place for just such an eventuality......


I don't think many directors do that
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By Truthsayer
23rd May 2021 08:34

Has anyone been legally appointed to manage his affairs? If so, appraise them of the situation and follow their instructions. If no such appointment has been made, do nothing other than send a reminder to the company of what needs doing. It's not your problem.

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Replying to Truthsayer:
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By Hugo Fair
23rd May 2021 12:23

Specifically, how do you propose to arrive at the decision that sole director resigns directorship ... if no-one has been legally appointed to manage his affairs?
However harsh it may sound, that is not advice you can safely give in circumstances outlined in OP unless it is to someone with legal responsibilities for the company (and who is 'capable' of sound judgement).

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By JD
23rd May 2021 17:17

Is the owner likely to be out of action long term, or is it a short term circumstance with the owner at least returning to a position of being able to make some decisions.

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Replying to JD:
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By bernard michael
24th May 2021 09:06

JD wrote:

Is the owner likely to be out of action long term, or is it a short term circumstance with the owner at least returning to a position of being able to make some decisions.

I'm told the prognosis is long term

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By ireallyshouldknowthisbut
24th May 2021 09:25

If there are no assets, no creditors, no ongoing business and no stakeholders then I would explain to the wife your only option is to do a proper job and charge X, keep it going.

However if you resigned some less reputable accountants might suggest that her *coughs* husband files a DS01 online and it all goes away, but you could not of course recommend such a course of action bound as you are by professional ethics.

I would hint rather hard about the second option but not be drawn into enacting it for her. That way you can be both pragmatic and ethical.

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By Mr_awol
24th May 2021 10:27

"Never owed or paid CT" = losses brought forward?

Plus you mention it is/was a pub.

First thing i would do it determine (as best i could) sales for the cessation period and compare those to the losses b/f. If losses exceed turnover then there is great comfort that chances of CT (at least) are slim to none. You say there is a VAT debtor so it sounds as if VAT is up to date and as such you should have sales records.

If there aren't quite enough losses then you may be able to assess whether there is any realistic chance of taxes o/s. i.e. if you have £90k losses but £100k sales then you don't need to be a genius to work it out that GP would be below loss.

Factor in any likely/claimed business rates grants etc for March and, potentially, other periods.

If losses are plentiful and VAT is covered then a pragmatic approach becomes much more reasonable.

Sadly, if there is a chance of tax being at stake I'd be sticking to the 'we really need to get some accounts done here' line. Even if it's the best we can sling together in the circumstances with the records available.

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Replying to Mr_awol:
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By bernard michael
24th May 2021 10:38

Mr_awol wrote:

"Never owed or paid CT" = losses brought forward?

Plus you mention it is/was a pub.

First thing i would do it determine (as best i could) sales for the cessation period and compare those to the losses b/f. If losses exceed turnover then there is great comfort that chances of CT (at least) are slim to none. You say there is a VAT debtor so it sounds as if VAT is up to date and as such you should have sales records.

If there aren't quite enough losses then you may be able to assess whether there is any realistic chance of taxes o/s. i.e. if you have £90k losses but £100k sales then you don't need to be a genius to work it out that GP would be below loss.

Factor in any likely/claimed business rates grants etc for March and, potentially, other periods.

If losses are plentiful and VAT is covered then a pragmatic approach becomes much more reasonable.

Sadly, if there is a chance of tax being at stake I'd be sticking to the 'we really need to get some accounts done here' line. Even if it's the best we can sling together in the circumstances with the records available.


Would you prepare accounts from what you know are incorrect figures? Is it not better to do nothing
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Replying to bernard michael:
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By Mr_awol
24th May 2021 11:35

Sometimes you don't have a choice. Extreme examples might include where the manual records were destroyed by fire.

As stated, though, the availability (or otherwise) of losses makes a difference. Were/are there any and are they likely to exceed t/o for the final period?

At the end of the day if the business is ceasing anyway, and we are talking about whether it closing with £30k of wasted CT losses or £80k of wasted CT losses then im not about to get too excited about it.

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Replying to Mr_awol:
ALISK
By atleastisoundknowledgable...
24th May 2021 10:42

But who would sign them off?

I’m in the ‘do nothing & wait for CoHo to strike off’ or ‘’cough’ Director signs DS01’ camps.

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Replying to atleastisoundknowledgable...:
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By Mr_awol
24th May 2021 11:37

True. There'd need to be some thought to that but for a modest spend on professional fees the wife could obtain the authority to deal with this and then it could be done properly rather than waiting for CoHo to sort it out or the 'director' signing a DS01 (might be hard to hold the paper still, with that tickly cough, after all).

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By bernard michael
24th May 2021 10:42

My main purpose is to protect the wife from any additional grief as she is about to go into hospital for a cancer operation.(life's sometimes very unfair)

The consensus appears to be advise and do nothing
As we are the RO the flack should come in our direction first and I can judge it then

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Replying to bernard michael:
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By Mr_awol
24th May 2021 11:39

Are you also directors' service address?

Otherwise, once the accounts get very late, the directors will be personally contacted/written to and that's when the wife may get the 'scary' letter and panic.

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Replying to Mr_awol:
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By bernard michael
24th May 2021 11:59

Mr_awol wrote:

Are you also directors' service address?

Otherwise, once the accounts get very late, the directors will be personally contacted/written to and that's when the wife may get the 'scary' letter and panic.


I'd forgotten about that. Just checked and it's the RO from 2 moves ago. It wasn't changed. They'll have fun finding him
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By birdman
26th May 2021 09:40

I would go old-school, write a full letter of explanation to HMRC and Companies House, ask for their guidance and suggestions, then do nothing. Should nasty chasing letters emerge, refer them to your correspondence. Full disclosure, mitigating circumstances - can't imagine penalties would be upheld at a later date if they need to be appealed.

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By dmmarler
26th May 2021 15:03

Just goes to show what a mess companies have become since the one director/one shareholder/no company secretary opportunity arose.

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By dmmarler
26th May 2021 15:03

Just goes to show what a mess companies have become since the one director/one shareholder/no company secretary opportunity arose.

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By tedbuck
27th May 2021 11:07

I think I would go with Birdman and do it the old fashioned way - at least everyone's backs are covered as far as they can be.

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By tedbuck
27th May 2021 11:07

I think I would go with Birdman and do it the old fashioned way - at least everyone's backs are covered as far as they can be.

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