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Issuing court proceedings against dissolved co

Issuing court proceedings against dissolved co

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Hi,

We have a client who ceased trading last year. We assisted them in the winding up of the company, finalising returns, etc. including submitting he forms to Companies House and paying the filing fee ourselves. Despite chasing the client for the past 6 months our final invoice has not been paid, the ex director blaming a lack of funds. We have given the client every chance to pay however he is now ignoring calls and emails and so would like to start to issue proceedings, however who should these be against? The company is dissolved and whilst the director requested the company be wound up, would he be liable for the cost?

Thanks in advance.

Replies (17)

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By neileg
01st Jul 2014 10:49

LOE

What does it say in your letter of engagement? That is the basis of your contract.

If you don't have one, don't expect to see the money any time soon, if ever.

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By bernard michael
01st Jul 2014 10:50

You sue whoever your have a contract with eg the payee on the invoice. You cannot sue the company as it is dissolved

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By johngroganjga
01st Jul 2014 11:14

With the greatest respect you seem to have shot yourselves in the foot by assisting in the winding up of your debtor without taking the obvious step of ensuring that it paid your fees first. 

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By taxguru
01st Jul 2014 11:29

Unless the director has personally guaranteed your payments, s/he is not personally liable for the company's debts. And the company is dead, and with it the debt too!!

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By cbp99
01st Jul 2014 12:12

In these cases

It is important to contact Companies House and object to the striking off process, although you may need to keep renewing the objection.

We recently had a similar case, and issued proceedings against both the company and the director. (Our terms of engagement include a clause reserving the right to enforce against the nominated director, although I have seen it suggested that this does not amount to a personal guarantee). No defence was entered, and although to our shock Companies House had struck the company off in the meantime, we were paid by the director.

In the OP's case, it would seem that form DS01 was used, with an untrue affirmation by the director that the company had no creditors.I don't know whether that opens any avenues for redress.

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Replying to DJKL:
By johngroganjga
02nd Jul 2014 11:41

Strikng off

cbp99 wrote:

It is important to contact Companies House and object to the striking off process, although you may need to keep renewing the objection.

But we are told here that the OP was the promoter of the striking off process, even paying the £10 fee out of their own pocket as a disbursement.  It would have been a bit odd, not to mention a complete waste of £10, to initiate the striking off process with one hand while lodging objections to it with the other.

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Replying to jford:
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By cbp99
02nd Jul 2014 12:55

.

johngroganjga wrote:

cbp99 wrote:

It is important to contact Companies House and object to the striking off process, although you may need to keep renewing the objection.

But we are told here that the OP was the promoter of the striking off process, even paying the £10 fee out of their own pocket as a disbursement.  It would have been a bit odd, not to mention a complete waste of £10, to initiate the striking off process with one hand while lodging objections to it with the other.

Agreed - I was making the point as a general rule.

In our case that I mentioned, in which we assisted with the striking off (but we didn't pay the tenner!), we assumed it would be a formality that the company would settle our fees, as no queries had been raised to our invoice. I imagine OP similarly anticipated payment without any difficulty.

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7om
By Tom 7000
04th Jul 2014 12:06

Give up

You arent going to get paid.and if you chase it it will just be throwing money away

Next time you dissolve a company get paid in advance.

You have learned a lesson

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By SimonP
04th Jul 2014 16:16

Harsh reality

Many, many, many years ago [another century] a colleague within our business group asked if I would do his company's accounts (a well-known franchise).

I had no reason to believe that he was in trouble but upon completion, when I pointed out that the company was insolvent, he wound it up and I never got paid.

That was a lesson learned the hard way. After that, my engagement letter for companies has always stated that the directors will be personally liable for my fees should the company be unable to pay. And all directors have to agree and sign or I decline the engagement. Simples!

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By paddy55
05th Jul 2014 02:02

Normally, the directors winding up a company must keep sufficient funds to pay all the debts of the company. If thed do not, they are personally liable to  pay the debts.

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Stepurhan
By stepurhan
05th Jul 2014 08:00

Potentially

If a company is insolvent then, by definition, they cannot keep sufficient funds to pay all the debts of the company. Whether they then become liable will largely depend on whether they can be proved to have acted in bad faith, allowing the veil of incorporation to be lifted. If they automatically became liable for all debts, it would make a mockery the limited liability status of companies.

Potentially you have a claim against the directors. The fact that you assisted in screwing[***] yourself over by winding the company up, and paying the fee, is likely to go against you in any proceedings. Whether it is worth pursuing is likely to be down to how much is owed, but you are probably better off taking this as an expensive lesson. As others have said, review your engagement terms, especially those making directors personally liable from the outset.

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By paddy55
05th Jul 2014 12:58

Personal liablity for company debt

Hi Stepurhan,

If the companyu was solvent when wound up, the directors should have retained sufficient funds to pay the debts.

If the company was insolvent, then a liquidator should have been appointed and the liquidator should have paid all notified claims etc. If the liquidation was not conducted properly and any person suffered loss as a result, then that person would have a claim against the liquidator.

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Stepurhan
By stepurhan
06th Jul 2014 12:16

Automatic liability?

I'm not saying that the director cannot be made liable. I am questioning your assumption that it is "automatic". If you can link to either legislation or case law that makes directors automatically responsible for company debts then please do so. All you've done is repeat the assertion that I'm questioning. Repetition is not proof that an assertion is correct.

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Replying to carnmores:
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By neileg
07th Jul 2014 09:45

@stepurhan

stepurhan wrote:

I'm not saying that the director cannot be made liable. I am questioning your assumption that it is "automatic". If you can link to either legislation or case law that makes directors automatically responsible for company debts then please do so. All you've done is repeat the assertion that I'm questioning. Repetition is not proof that an assertion is correct.

I suspect you are wasting your electrons. This gentleman seems to have a strange take on the legal position.
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By paddy55
06th Jul 2014 23:31

Personal Liability for Company Debts

Stephurhan,

If a director is negligent and causes loss to a person, then that person can sue the director.

Usually, the company can be sued as well.

 

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Replying to lionofludesch:
Stepurhan
By stepurhan
08th Jul 2014 08:10

Different argument

paddy55 wrote:
If a director is negligent and causes loss to a person, then that person can sue the director.
This is not what you said originally. You just said that a director not keeping sufficient funds to pay creditors automatically becomes liable. Proving a director has been negligent is a higher standard of evidence than simply, they did not have enough money to pay me.

Say, at cessation of trade, a company has £12,000 of debtors and £10,000 of creditors. If £9,000 of those debtors suddenly become bad, that doesn't make the director automatically liable for the resulting £7,000 shortfall on creditors.

It might be possible to sue the director for negligence in this case (they can't, as you say, sue the company as well. The company no longer exists). As the OP paid the fee and submitted the form, what is to stop the director turning around and disclaiming responsibility for striking the company off with debts unpaid? As I said, screwing[***] yourself over is not a good starting point for action.

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By Wyn
07th Jul 2014 09:41

Why bother!

What would be the point pursuing a debt from someone who has no money.  Even if you go to the expense and grief of legal proceedings and win your claim, he still can't pay you anyway.

 

Send him a statement every couple of months, keep adding the non payment interest your entitled to, let him sweat it.  eventually hell make you an offer of the original debt, when he gets his feet back on the ground.

 

 

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