Heres a tricky one,not quite a company director....but
Discussion
Be interested in any comments, I went into business with a guy, who has a VERY big business, last year. Company set up; he is Director I was Company Secretary. He has no involvement in the business.
Company traded for 12 months closing down not making money, guy I went into business stumped up £50K to start it, I was taking a monthly consultancy fee, I was not an employee of the business, it employed about 10 people. I consulted to the business and ran it. I employed everyone wrote their emplyment contracts and had MD on business card.
Last 4 months of the business it could not afford my fee, I paid personal expenses on the company credit card, this was all clearly shown in the accounts as Directors Loan and also I had to present figures to his inhouse accounts team each month. Both me and my partner were signaturies on the bank account.
Now, some 6 months after the event, as the company is wound up his solicitor is trying to say this was unauthorised personal use and I must repay. The fact I was owed ten times the amount is, he claims irrelevant. They want to take me to court unless I repay.
My argument is, I controlled very aspect of the business, who else could have authorised apart from me, my "partner" at no point exercised any controls on the business and there are absolutely NO contracts between us limiting what I could or could not do. There was an established practice of paying my expenses in lieu of payment of fee.
Thoughts anyone?
Company traded for 12 months closing down not making money, guy I went into business stumped up £50K to start it, I was taking a monthly consultancy fee, I was not an employee of the business, it employed about 10 people. I consulted to the business and ran it. I employed everyone wrote their emplyment contracts and had MD on business card.
Last 4 months of the business it could not afford my fee, I paid personal expenses on the company credit card, this was all clearly shown in the accounts as Directors Loan and also I had to present figures to his inhouse accounts team each month. Both me and my partner were signaturies on the bank account.
Now, some 6 months after the event, as the company is wound up his solicitor is trying to say this was unauthorised personal use and I must repay. The fact I was owed ten times the amount is, he claims irrelevant. They want to take me to court unless I repay.
My argument is, I controlled very aspect of the business, who else could have authorised apart from me, my "partner" at no point exercised any controls on the business and there are absolutely NO contracts between us limiting what I could or could not do. There was an established practice of paying my expenses in lieu of payment of fee.
Thoughts anyone?
Christ, where do I start!?
There are a few things that an 'outsider' may not understand such as you not being salaried, yet being the company secretary, yet being paid as a consultant and having Managing Director on your business card.
This may have been a tangled web that your partner may have been happy with but to an outsider, especially a solicitor this wont look so good.
Now 'personal expenses' on a company card in itself would not usually be allowed. Indeed, if your partner has employed this solicitor to try and recover as much as possible this would seem a good start.
Do you have a contract, preferably in writing about how much you would be paid?
There are a few things that an 'outsider' may not understand such as you not being salaried, yet being the company secretary, yet being paid as a consultant and having Managing Director on your business card.
This may have been a tangled web that your partner may have been happy with but to an outsider, especially a solicitor this wont look so good.
Now 'personal expenses' on a company card in itself would not usually be allowed. Indeed, if your partner has employed this solicitor to try and recover as much as possible this would seem a good start.
Do you have a contract, preferably in writing about how much you would be paid?
Unless you were authorised to draw money to pay personal living expenses I doubt if you have much of a defence. As you admit, the company could not afford to pay you the normal retainer. Therefore, the assumption must be that it couldn't afford to pay your personal costs either.
Does this mean that the company allowed an overdrawn loan account to develop in your name?
Technically, that was in contravention of company law and the expectation would be that the company should pay the full PAYE and NI due on the overdrawn loan account (plus the company might need to pay Section 419 Corporation Tax on the overdrawn loan account balance )> Alternatively, to ensure the rules are properly complied with, you repay in full to the company the excess balance drawn by you.
Does this mean that the company allowed an overdrawn loan account to develop in your name?
Technically, that was in contravention of company law and the expectation would be that the company should pay the full PAYE and NI due on the overdrawn loan account (plus the company might need to pay Section 419 Corporation Tax on the overdrawn loan account balance )> Alternatively, to ensure the rules are properly complied with, you repay in full to the company the excess balance drawn by you.
Edited by Eric Mc on Friday 16th November 09:52
Eric Mc said:
As you admit, the company could not afford to pay you the normal retainer. Therefore, the assumption must be that it couldn't afford to pay your personal costs either.
We had that when we first started - we didn't have any income for the first 4 months, but one particular guy cheerfully used the company credit card for his day to day expenses, as if there was some magic pot of money to pay the bill 
There’s quite a mish mash of terms in your post:
Company Secretary. Consultancy fee,
Not an employee of the business
I consulted to the business and ran it.
I employed everyone wrote their employment contracts and had MD on business card.
Me and my partner were signatories on the bank account.
Directors Loan
Personal expenses on the company credit card
What a shambles of a set up.
I think you'll be lucky not to get done for theft from the company, false accounting and for fraudulently using the credit card.
jo strummer said:
Papertrail is all shown in accounts and on credit card, no attempt to hide and not queried at any time in preceding months.
Not suggesting that anyone tried to hide it, rather does this form some sort of agreed payment process? And the fact that it wasn't queried, doesn't make it right.Resonsibility for poor accounting in a company rests primarilly with the directors. The Comapny Secretary can also be implicated - especially if it is seen that he may have been the beneficiary of that poor accounting.
The directors and secretary of a limited company are the "Officers" of the company and are the ones most exposed when things go wrong. Blaming inefficient underlings will not impress a judge as the officers will ha deemed to have been respnsible for hiring them and controlling them in the first place.
The directors and secretary of a limited company are the "Officers" of the company and are the ones most exposed when things go wrong. Blaming inefficient underlings will not impress a judge as the officers will ha deemed to have been respnsible for hiring them and controlling them in the first place.
I am not blaming anyone, least of all underlings, what I am saying is that the accounts were prepared by independant accountants and then submitted to my partners inhouse accounting team ( and this is not a small business ) it was clear what I was doing and the payments I had off the credit card were in netted off against the monthly fee. For 6 months this carried on with no objection from anyone, in fact I told his accounting team what I was doing when cashflow was being discussed. My point is, 6 months down the line the guy is trying to say he was not aware of this when clearly he was.
Was he?
The independent accountants may not have been up to speed either - but even they will be able to abdicate responsibility. Only if they were formally appointed company "Auditors" would they have any real share of the blame for poor monitoring of the company's financial activities.
At the end of the day, directors and other company officers MUST be aware of their responsibilities because it is THEY that that have to carry the can when things go bad.
Have you ascertained the balance you owe the company in respect of your loan account?
Irrespective as to what the directors are insisting you pay, if you owe money to the company i.e. you drew out more than you were entitled to - you are LEGALLY obliged to pay it back - even if this happened due to negligence on the part of others.
There's not much more I can say on this.
The independent accountants may not have been up to speed either - but even they will be able to abdicate responsibility. Only if they were formally appointed company "Auditors" would they have any real share of the blame for poor monitoring of the company's financial activities.
At the end of the day, directors and other company officers MUST be aware of their responsibilities because it is THEY that that have to carry the can when things go bad.
Have you ascertained the balance you owe the company in respect of your loan account?
Irrespective as to what the directors are insisting you pay, if you owe money to the company i.e. you drew out more than you were entitled to - you are LEGALLY obliged to pay it back - even if this happened due to negligence on the part of others.
There's not much more I can say on this.
Edited by Eric Mc on Friday 16th November 14:38
jo strummer said:
I am not blaming anyone, least of all underlings, what I am saying is that the accounts were prepared by independant accountants and then submitted to my partners inhouse accounting team ( and this is not a small business ) it was clear what I was doing and the payments I had off the credit card were in netted off against the monthly fee. For 6 months this carried on with no objection from anyone, in fact I told his accounting team what I was doing when cashflow was being discussed. My point is, 6 months down the line the guy is trying to say he was not aware of this when clearly he was.
I hear you.My advice would be to speak to your partner direct. The solicitor would have his motivations and job to do and is probably doesnt understand what is going on.
I would just level with him in that if you are owed 6 months wages/'fees', yet you are being chased for a couple of grand. You will write off what you are owed as long as he gets his solicitor to do the same.
What not to do would be to send 6 months invoices to the soliciotor and call his bluff. He is being paid by the hour no doubt and would probably be more than happy to fight out the issues in court 'on behalf' of your partner.
JustinP1 said:
jo strummer said:
I am not blaming anyone, least of all underlings, what I am saying is that the accounts were prepared by independant accountants and then submitted to my partners inhouse accounting team ( and this is not a small business ) it was clear what I was doing and the payments I had off the credit card were in netted off against the monthly fee. For 6 months this carried on with no objection from anyone, in fact I told his accounting team what I was doing when cashflow was being discussed. My point is, 6 months down the line the guy is trying to say he was not aware of this when clearly he was.
I hear you.My advice would be to speak to your partner direct. The solicitor would have his motivations and job to do and is probably doesnt understand what is going on.
I would just level with him in that if you are owed 6 months wages/'fees', yet you are being chased for a couple of grand. You will write off what you are owed as long as he gets his solicitor to do the same.
What not to do would be to send 6 months invoices to the soliciotor and call his bluff. He is being paid by the hour no doubt and would probably be more than happy to fight out the issues in court 'on behalf' of your partner.
Eric I exclude you from the above, you as usual talk and make sense.
I WILL add one other point - if you were being paid outside of the PAYE system for "services rendered" to the company as a "consultant", even though you are an "officer" of the company, it could be claimed that those "legitimate" payments were actually incorrect as they had been paid without deduction of the correct PAYE and NI.
Were athe accountants acting as formal "auditors"?
Thanks
Were athe accountants acting as formal "auditors"?
Thanks
Edited by Eric Mc on Friday 16th November 14:51
jo strummer said:
Last 4 months of the business it could not afford my fee, I paid personal expenses on the company credit card, this was all clearly shown in the accounts as Directors Loan and also I had to present figures to his inhouse accounts team each month. Both me and my partner were signaturies on the bank account.
So the company loaned you money to pay your personal expenses. Regarding your fee, did the flip side also happen? E.G. You loaned the company money for it to pay your fee? (This is a paper transaction with no money moving around.) Gassing Station | Business | Top of Page | What's New | My Stuff