Phoenix Company - Serious thread

[colinrobinson]

the sheriff

All,

Right then, bit a of a long story. Ill try and keep it short.

Was subcontract some development work 14 months ago, no contracts but verbal agreements and confirmed via email, did the work, delivered on time, website went live.....client then said "not got the money to pay you", loads of excuses, push came to shove, started Small Claims Court action in Feb 2014, went to court in Sept, client turned up unrepresented, was ripped apart by our barrister and Judge even tore the client a new one too lol. We won outright Client must pay us the full sum owed, plus fees, plus travel expenses, plus loss of earnings (up to £90) etc etc Note to newbies - emails proved alot and helped in court.

Anyway, client still didnt pay, so we kicked the case up to the High court who sent the sheriffs in. Client has assets (bearing in mind they are an IT company developing software/websites) one laptop and one printer to roughly £250. The total debt is roughly £3500.

The client has now agreed to pay £100 per month.

It turns out that this client also owes HMRC £5k+ and where their offices are £2k (behind 6 months on their rent) which we only found out in August this year.

I've just looked tonight and this client has setup a brand new Limited Company in November, it has a different name but same single director. There is no SIC code on the new company yet.



We will be speaking to our solicitor next week but was wondering whether anybody else has had the same experience and/or what routes we could potentially go down.

Thanks in advanced.
GE

Did the sheriff take a personal guarantee, worth asking as this would make guy personally liable ?

[eek]

Why should he? I'd be doing what I could to destroy them, personally.

Because

Company A (your debtor company) is an entirely separate legal entity from Company B and generally speaking you can not pursue Company B for the debts of Company A.

It does not matter if the name is almost identical or if the directors/shareholders/registered office are the same as the company number will be different and that is the sole identifier that will be relevant.

However, if assets are transferred from Company A to Company B at less than market value and to the detriment of the creditors then technically this breaches company insolvency laws. The problem is proving that this has happened.

We suspect Company A will soon "cease trading" and Company B will launch. If that is the case the only way to force an investigation is to wind up Company A and ask the Official Receiver to look in to the asset transfer.

The likely cost of this is in the region of £2k to wind the company up with a further £1.5-2k in having the accounts audited/investigated and even then, there is no guarantee that the Official Receiver will take any action against the company or its directors.

In fact recent statistics would suggest you have a 95% chance of not being disqualified as a director even if you are reported to the Insolvency Service!

Given the situation you describe above, it would not seem to make commercial sense to wind up Company A as you would likely just double your losses.



Banks often use a personal guarantee but this has to be drawn up properly by a reputable solicitor that specialises in contractual work, it is not as simple as getting the Director to say "I personally guarantee this sum". Just so you know

as stated above absolutely nothing can be done about it. The best advice (as when being messed around by agents) is to ignore it, actively work to minimise your losses (by writing the money owed off, don't continuing work and walk away) and move on asap to something that pays...

I learnt that years ago at boo.com.

[Safe Collections]

All,

Right then, bit a of a long story. Ill try and keep it short.

Was subcontract some development work 14 months ago, no contracts but verbal agreements and confirmed via email, did the work, delivered on time, website went live.....client then said "not got the money to pay you", loads of excuses, push came to shove, started Small Claims Court action in Feb 2014, went to court in Sept, client turned up unrepresented, was ripped apart by our barrister and Judge even tore the client a new one too lol. We won outright Client must pay us the full sum owed, plus fees, plus travel expenses, plus loss of earnings (up to £90) etc etc Note to newbies - emails proved alot and helped in court.

Anyway, client still didnt pay, so we kicked the case up to the High court who sent the sheriffs in. Client has assets (bearing in mind they are an IT company developing software/websites) one laptop and one printer to roughly £250. The total debt is roughly £3500.

The client has now agreed to pay £100 per month.

It turns out that this client also owes HMRC £5k+ and where their offices are £2k (behind 6 months on their rent) which we only found out in August this year.

I've just looked tonight and this client has setup a brand new Limited Company in November, it has a different name but same single director. There is no SIC code on the new company yet.



We will be speaking to our solicitor next week but was wondering whether anybody else has had the same experience and/or what routes we could potentially go down.

Thanks in advanced.
GE

Company A (your debtor company) is an entirely separate legal entity from Company B and generally speaking you can not pursue Company B for the debts of Company A.

It does not matter if the name is almost identical or if the directors/shareholders/registered office are the same as the company number will be different and that is the sole identifier that will be relevant.

However, if assets are transferred from Company A to Company B at less than market value and to the detriment of the creditors then technically this breaches company insolvency laws. The problem is proving that this has happened.

We suspect Company A will soon "cease trading" and Company B will launch. If that is the case the only way to force an investigation is to wind up Company A and ask the Official Receiver to look in to the asset transfer.

The likely cost of this is in the region of £2k to wind the company up with a further £1.5-2k in having the accounts audited/investigated and even then, there is no guarantee that the Official Receiver will take any action against the company or its directors.

In fact recent statistics would suggest you have a 95% chance of not being disqualified as a director even if you are reported to the Insolvency Service!

Given the situation you describe above, it would not seem to make commercial sense to wind up Company A as you would likely just double your losses.

/
Do you have a personal guarantee from the director? If not you are stuck unfortunately - unless HMRC pursue legal action though as a civil matter you are very unlikely to see your fees paid unfortunately.

For reference, a personal guarantee places the financial liability with the director rather than the limited company. Banks use this all of the time with credit for new companies with no credit history.

This is also a lesson for checking the credit worthiness of companies prior to completing work. A lot of smaller companies have recommended credit limits of less than £500. I am flabbergasted that contractors don't do this more often (not to say that the OP didnt, talking generally here).

Banks often use a personal guarantee but this has to be drawn up properly by a reputable solicitor that specialises in contractual work, it is not as simple as getting the Director to say "I personally guarantee this sum". Just so you know

[SueEllen]

I would have talked to a collections company before a solicitor.

There is little point taking a company to court if they have no assets and a debt to HMRC. (As you are finding.)

A few lawyers I know and met always advocate making a private arrangement with any debtor then only enforcing the payment plan in court when they stray from this arrangement.

Also I'm puzzled why you used a solicitor for a small claim as you can't claim the fees back and this adds to your losses.

[Scratch It]

All,

Right then, bit a of a long story. Ill try and keep it short.

Was subcontract some development work 14 months ago, no contracts but verbal agreements and confirmed via email, did the work, delivered on time, website went live.....client then said "not got the money to pay you", loads of excuses, push came to shove, started Small Claims Court action in Feb 2014, went to court in Sept, client turned up unrepresented, was ripped apart by our barrister and Judge even tore the client a new one too lol. We won outright Client must pay us the full sum owed, plus fees, plus travel expenses, plus loss of earnings (up to £90) etc etc Note to newbies - emails proved alot and helped in court.

Anyway, client still didnt pay, so we kicked the case up to the High court who sent the sheriffs in. Client has assets (bearing in mind they are an IT company developing software/websites) one laptop and one printer to roughly £250. The total debt is roughly £3500.

The client has now agreed to pay £100 per month.

It turns out that this client also owes HMRC £5k+ and where their offices are £2k (behind 6 months on their rent) which we only found out in August this year.

I've just looked tonight and this client has setup a brand new Limited Company in November, it has a different name but same single director. There is no SIC code on the new company yet.



We will be speaking to our solicitor next week but was wondering whether anybody else has had the same experience and/or what routes we could potentially go down.

Thanks in advanced.
GE

/
Do you have a personal guarantee from the director? If not you are stuck unfortunately - unless HMRC pursue legal action though as a civil matter you are very unlikely to see your fees paid unfortunately.

For reference, a personal guarantee places the financial liability with the director rather than the limited company. Banks use this all of the time with credit for new companies with no credit history.

This is also a lesson for checking the credit worthiness of companies prior to completing work. A lot of smaller companies have recommended credit limits of less than £500. I am flabbergasted that contractors don't do this more often (not to say that the OP didnt, talking generally here).

[malvolio]

This is what "limited liability" company structures, and serial entrepreneurship is all about. If your business fails, you shut it down, at no personal loss to the directors unless they can be proven to be grossly negligent, and then free to try again.

How do you close a company with tax debts outstanding? More likely it is dormant and the guy is continuing to trade under a new label. If the business is identical, it is actually illegal to do so, although nobody seems to want to take such things to court.

You can always bankrupt the original company, but since there's no money there's not a lot of point. If you can prove the guy was trading while knowingly insolvent - a big IF - you can sue him personally and at least bugger up his new business.

If all else fails, you can write the debt off and at least get the CT relief on it.

[FarmerPalmer]

This is what "limited liability" company structures, and serial entrepreneurship is all about. If your business fails, you shut it down, at no personal loss to the directors unless they can be proven to be grossly negligent, and then free to try again.

[vwdan]

Dodgy Double glazing and car repair companies phoenix themselves all the time. There is nothing you can do about it so just calm down and accept it...

Why should he? I'd be doing what I could to destroy them, personally.

[eek]

All,

Right then, bit a of a long story. Ill try and keep it short.

Was subcontract some development work 14 months ago, no contracts but verbal agreements and confirmed via email, did the work, delivered on time, website went live.....client then said "not got the money to pay you", loads of excuses, push came to shove, started Small Claims Court action in Feb 2014, went to court in Sept, client turned up unrepresented, was ripped apart by our barrister and Judge even tore the client a new one too lol. We won outright Client must pay us the full sum owed, plus fees, plus travel expenses, plus loss of earnings (up to £90) etc etc Note to newbies - emails proved alot and helped in court.

Anyway, client still didnt pay, so we kicked the case up to the High court who sent the sheriffs in. Client has assets (bearing in mind they are an IT company developing software/websites) one laptop and one printer to roughly £250. The total debt is roughly £3500.

The client has now agreed to pay £100 per month.

It turns out that this client also owes HMRC £5k+ and where their offices are £2k (behind 6 months on their rent) which we only found out in August this year.

I've just looked tonight and this client has setup a brand new Limited Company in November, it has a different name but same single director. There is no SIC code on the new company yet.



We will be speaking to our solicitor next week but was wondering whether anybody else has had the same experience and/or what routes we could potentially go down.

Thanks in advanced.
GE

Dodgy Double glazing and car repair companies phoenix themselves all the time. There is nothing you can do about it so just calm down and accept it...

[garethevans1986]

All,

Right then, bit a of a long story. Ill try and keep it short.

Was subcontract some development work 14 months ago, no contracts but verbal agreements and confirmed via email, did the work, delivered on time, website went live.....client then said "not got the money to pay you", loads of excuses, push came to shove, started Small Claims Court action in Feb 2014, went to court in Sept, client turned up unrepresented, was ripped apart by our barrister and Judge even tore the client a new one too lol. We won outright Client must pay us the full sum owed, plus fees, plus travel expenses, plus loss of earnings (up to £90) etc etc Note to newbies - emails proved alot and helped in court.

Anyway, client still didnt pay, so we kicked the case up to the High court who sent the sheriffs in. Client has assets (bearing in mind they are an IT company developing software/websites) one laptop and one printer to roughly £250. The total debt is roughly £3500.

The client has now agreed to pay £100 per month.

It turns out that this client also owes HMRC £5k+ and where their offices are £2k (behind 6 months on their rent) which we only found out in August this year.

I've just looked tonight and this client has setup a brand new Limited Company in November, it has a different name but same single director. There is no SIC code on the new company yet.

TL;DR:

Company owes us money, started Small Claims Court action, ended up in court, won court case, still didnt pay, High Court sheriffs managed to get them to pay us £100 a month on debt of ~£3500. Director of client company has setup a new company with different name.

We will be speaking to our solicitor next week but was wondering whether anybody else has had the same experience and/or what routes we could potentially go down.

Thanks in advanced.
GE