Co-Director - Taking Co Funds. Advice?

[MaryPoppins]

Hi all

In brief, the Ltd Co I work through has two directors - one of which is me. Unfortunately, over the last six months, the other director has taken company funds (not dividends) as "loans" from the business reserve account.

The last amount was taken without my knowledge, with no previous amounts repaid as yet. We are currently at serious risk of being unable to pay the CT in December.

I am now obviously concerned that the remaining funds will be taken by the other director, leaving VAT, CT etc unpaid.

I am going to get some legal advice on this, but wondered if anyone had any experience of this sort of situation. There are some funds remaining in the company account, and while it did initially occur to me to move them to a private account to protect them, I don't really want to get myself implicated.

If the worst case scenario therefore occurs, and all company funds are taken, leaving CT etc unpaid - how implicated am I? Will I be responsible for repaying these company funds, and can I be prosecuted if this goes any further?

Thanks - any tips appreciated.

MP

[Moscow Mule]

The last amount was taken without my knowledge,

I'd take legal advice, but I'm pretty sure that's not allowed if you've got the company set up in the normal manner.

[BrilloPad]

Is it possible to get the bank account frozen until the mess is cleared up?

[Menelaus]

Who's the shareholder? If you're the majority shareholder, surely the co can sack the other director?

[MaryPoppins]

Is it possible to get the bank account frozen until the mess is cleared up?

Not without both of our consent unfortunately. Basically I am trying to work on the assumption he will take whatever is left in there now - he might not, but then again, he might. So if he does, will I be as liable as him?

As for shareholders, we're both equal...

[DaveB]

Definately :

Get legal advice asap.

Keep copies of all the evidence you can get hold of - bank staments etc.

Possibly :

Consider resigning as a director, documenting your reasons.

Get a new LTD setup asap with you as sole director and get the agency to pay the new limited for the work you are doing.

PS. How's the Baby doing?

[MaryPoppins]

Definately :

Get legal advice asap.

Keep copies of all the evidence you can get hold of - bank staments etc.

Possibly :

Consider resigning as a director, documenting your reasons.

Get a new LTD setup asap with you as sole director and get the agency to pay the new limited for the work you are doing.

PS. How's the Baby doing?

Thanks Dave. Just come off the phone with my Dad's friend, a solicitor. He has confirmed that I can't prevent the money being taken, as we are both 50/50 shareholders, and that I should probably keep myself clean and not touch anything. Still not 100% sure on responsibility if it becomes legal though, he said he will try to look into that for me. I have kept copies of bank statements etc which clearly show the money going straight to his personal account.

I have been considering resigning for a while, but would actually rather wait until the close of this financial year now. Mainly so I can keep an eye on what he's up to.

Baby is still cooking in utero, due date in two weeks - eek!!

[DaveB]

As an after thought, if he is claiming that the funds are being taken as loans from the company and the amount is over £5000 then technically he is breaking the law, as Directors Loans are not supposed to exceed £5000 in any one year.

I say technically because it requires a complaint from a shareholder before any action can be taken by the authorities, but it may be something you want to keep in mind.

[Menelaus]

Thanks Dave. Just come off the phone with my Dad's friend, a solicitor. He has confirmed that I can't prevent the money being taken, as we are both 50/50 shareholders, and that I should probably keep myself clean and not touch anything. Still not 100% sure on responsibility if it becomes legal though, he said he will try to look into that for me. I have kept copies of bank statements etc which clearly show the money going straight to his personal account.

I have been considering resigning for a while, but would actually rather wait until the close of this financial year now. Mainly so I can keep an eye on what he's up to.

Baby is still cooking in utero, due date in two weeks - eek!!

I didn't realise that you had a small person en route.

1. Don't get stressed by this (any more than you have to, obviously)

2. Congratulations on the impending arrival.

[MaryPoppins]

As an after thought, if he is claiming that the funds are being taken as loans from the company and the amount is over £5000 then technically he is breaking the law, as Directors Loans are not supposed to exceed £5000 in any one year.

I say technically because it requires a complaint from a shareholder before any action can be taken by the authorities, but it may be something you want to keep in mind.

Really? He has said this about a previous amount, which well exceeds 5k.

If this is the case, then I will definitely bear it in mind, thank you. It means there may be some comeback for him which is what is probably required, as I suspect he currently thinks he has the luxury of paying back the "loans" whenever he likes. I don't really want to resort to threats, so if I'm prepared to carry out a complaint I can start looking at what (if any) potential come backs there are on me.

Ta, that's given me a bit of hope.