Reply to: Totally theoretical question.....

[girlfriday]

Actually, Cojak has it spot on.... The money in the account belongs to the HMRC, not the company nor either one of us personally. I merely wanted to know what I would have to deal with if he decided to nick it and run.

Thanks for the replies, very helpful indeed :-)

[TheFaQQer]

When she tells him that 'it's over'?

Over to the panel...

Open a new bank account in the company name, with only that director as a signatory to the account. Transfer the money over to the new company account. The money remains in the company name, but without the other director having access to it.

Then talk to the bank and take legal and accounting advice on what to do with the company from here on.

[SueEllen]

. And she wouldn't give a monkey's todger about HMRC if she was going to grab the dosh and run.

But who knows?

I hope she has checked he doesn't know any nasty characters who will act legally or illegally to pursue her.

After all if she doesn't trust him then she obviously doesn't know all his old school friends.........

[northernladuk]

People tend to put a gloss on personal thieving, the blunt but accurate term of 'stealing' gives me the impression that she's thinking about dumping him and doesn't trust him further than she can throw him. And she wouldn't give a monkey's todger about HMRC if she was going to grab the dosh and run.

But who knows?

That is what I thought as well. Anyone that is devious enough to steal a sizeable amount of someone else's cash isn't going to be phased by anything letters HMRC send (which they won't get anyway). Dunno how people sleep once they have done this personally but obviously people do. What goes around doesn't come around often enough but back to topic....

[cojak]

People tend to put a gloss on personal thieving, the blunt but accurate term of 'stealing' gives me the impression that she's thinking about dumping him and doesn't trust him further than she can throw him. And she wouldn't give a monkey's todger about HMRC if she was going to grab the dosh and run.

But who knows?

[Ticktock]

From the way the thread was worded I took it as basically asking for advice on whether the OP could get away with screwing the other director by taking all the cash without landing themselves in it, hence the "purely theoritical, of course" comment. Funny how everyone else assumed it was the opposite.

In any case, I thought that if money was taken from the account and not put as salary, divis or a loan then it had to be accounted for by that person for tax purposes anyway, otherwise they'll be in for it with HMRC directly, let alone the company getting hit.

[Wanderer]

Firstly you need to establish whether taking the money was legal. It is only legal if it has been sanctioned either as salary, divis or a loan.

Well put.

There is also the question of how many shares the other director owned in the company. If they were a majority shareholder then they may be in a stronger position with regards to running the company as they see fit.

If the loan was > £10k then if would require shareholder approval (S197 Companies Act). If this hasn't been given then it is illegal and potentially fraud so demand immediate repayment of the loan or you will report it to the police. I would get a solicitor involved to make the demand. Time is of the essence otherwise the other director could squander the money and not be able to repay it.

If it was less than £10k then it may be legal but as the director I would demand an immediate repayment of the money, once again via solicitors letter.

If the relations between the directors had irretrievably broken down and one director was a majority shareholder then they could call a meeting of the shareholders and vote on a resolution to dismiss the other director.

If he has taken this as a loan then if there is a debt that can´t be paid then the money will be chased after through the courts by the liquidator, when insolvency is inevtiable.

Yes it would get messy, right enough. I would engage legal advice straight away if the amounts were high so that the under party understands that the debt is not going to be simply written off without an ugly fight. In the event that they didn't repay the money, you could report them to HMRC and force them to declare the "income" in their self assessment which would hit them for a nasty tax bill.

Moral of the story, don't make boy friends/girl friends directors of your company unless there is a genuine business need. Even then, you have to be very careful who you go into business with. If you make them a share holder then make sure they are a different class of shares so you are protected if it all goes titsup.

If it's a spouse then that's different and it would all have to be taken into account in the divorce settlement which is potentially even more sad and messy.

[northernladuk]

You could point out that the ramifications for spending corp tax money and not being able to pay HMRC will affect both directors so isn't something you can do and get away scot free but I would say when people are so aggrieved that they think this is acceptable to do threats from HMRC don't really matter.

[BlasterBates]

I´m not an accountant but I see a couple of options.

Firstly you need to establish whether taking the money was legal. It is only legal if it has been sanctioned either as salary, divis or a loan. If not then I would expect you can simply take legal action to recover it. If it isn´t sanctioned i.e. not legal then I agree with the above advice that this could possibly be dealt with as fraud.

If he has taken this as a loan then if there is a debt that can´t be paid then the money will be chased after through the courts by the liquidator, when insolvency is inevtiable. In this case you ought to be able to inform the director that you will instigate liquidiation and in the end he will be liable for the debt. If he doesn´t respond to you personally you could get a lawyer/accountant to do this. This may make him realise that taking the money and running is not an option other than as a self-destructive exercise.

You need to check with your accountant first, i.e. was it a legal transfer and take it from there.

In my view simply transfering money from the company accounts as "retaliation" will end up being equally painful for the other director so it isn´t a rational thing to do, a bit like starting a nuclear holocaust.

[northernladuk]

Here is the thread from Mary Poppins that has been mentioned...

http://forums.contractoruk.com/accou...ds-advice.html

and

http://forums.contractoruk.com/accou...-recovery.html

[northernladuk]

(And a very good reason for not getting boy/girl friends not too close to one's business.)

Amen to this. We have posters here that has had this happen with wife and husband as well. It is normally mentioned when people ask about entering in to this kind of setup but rarely heeded.

[cojak]

How can the OP stop this from happening in the future?

When she tells him that 'it's over'?

Over to the panel...

[cojak]

PS. And it's not stealing, it's a Director's Loan.



(And a very good reason for not getting boy/girl friends not too close to one's business.)

[cojak]

Oh Dear.

A lot of heartache for Director 1 and very little comeback for Director 2, that's what.

Work your way through this post, an esteemed regular had something very similar happen to her.
http://forums.contractoruk.com/accou...-recovery.html

But 'theoretically' HMRC must be told about the situation pronto...

[BA to the Stars]

What was on the bank mandate of the company accounts - was it both to sign?

You may want to search for a thread by Mary Poppins from a couple of years ago where she faced a not so theoretical but similiar situation.