If anyone can give advice I would be grateful.
A client has been written to by solicitors of the Offical Recievers.
It appears that my client was repaid a loan he made to a family member's business. The family member has gone down the drain, but before doing so he repaid my client (his brother) the £15k he owed him.
Clearly he has done this ahead of paying his other creditors (I only know the landlord is one of his creditors so far)
Anyhow, The solicitors working on behalf of the Official receivers are asking my client for the £15k to be paid to them so they can distrubute it in the correct way.
Presumably my client in the long run is going to have to pay this over ? Obviously he needs legal advice, but if anyone can make any comments in the meantime I would be grateful.
Thanks
Replies (9)
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It sounds like a Preference. You are correct client will need legal advice. In meantime, presumably the OR's letter quotes on what basis the funds are to be repaid, client can look at legislation online.
It would be a matter for a legal adviser, you're correct in that. You're also correct that, if the loan was repaid after the business was in difficulties, your client will almost certainly have to pay it back.
As others suggest it is a legal rather than accounting matter, but I would not be too hasty in agreeing to the refund.
Just because the letter has been sent by the Official Receiver does not mean there is proof of a preferential payment, just a suspicion.
I would agree fraudulent preference is the issue
Client should put money in a ISA
Take legal advice
Fight all the way
Figure still a bit small in the scheme of things
BUT make sure it was genuine
A real loan by the right person backed up the paperwork and went directly to company from the person
Brothers bank account as an intermediary would change my view
My inexpert opinion is that the recovery legally would be from the director rather than the brother.
That was my thought also. Surely the business owner that paid it out is responsible for repaying the OR not the person he repaid?
If I owed 5 different banks and paid one of them off, I'd be surprised if they would then ask that bank or indeed the bank agree to repay the money.
I'm pretty sure it would be me they demand find it.
That might just be my moral view point and not a legal one of course.
I am no expert,
but I always understood that the preference makes the payment repayable
gift, genuine loan, or pretend loan irelevant.
Director is clearly insolvent so no point in chasing .
Bank thing a bit different
No issues with director putting cheques and cash to bank, even if bank has a personal guarantee.
The issue is taking money from the company and choosing the best mate, brother or other preferred person over the general body of creditors.
Director should not have been making any payments whilst company was insolvent
I assume the O.R is acting as Liquidator and the debtor was a Ltd Company that has entered Liquidation.
Yes, it does sound as if an illegal preference has been made here, assuming your client fits the criteria under S239:
https://www.legislation.gov.uk/ukpga/1986/45/section/239
Best for the client to get a specialist solicitor to negotiate, one that specialises in insolvency law. I can recommend one if they want to get in touch.
There is often scope for a deal, so depending on your clients financial position they may well be able to barter.