What rights does an Ex director have?
Discussion
I have recently taken on a new client whos accounts were in a bit of a mess.
There were two directors as of Sept 09 when one of them left.
The director who is left intstructed me at the beginning of Feb to process her accounts to 31 Jan 2010
This current director had no involment in the companies accounts and no involvement with the previous accountant, it was all dealt with by the ex director.
My situation is-
After reviewing the work that was done by the previous director for the accounts to 31 Jan 2010 i decided it would be easier for me to start the job again than try to make head nor tail of her work (basically she had no idea what she was doing and no accounting knowledge)
After receiving the opening balances from the previous accountant, it turns out that they had written of amounts to the directors loan account in order to make the accounts balance, this was done purely because the ex directors figures did not make sense.
The ex director is now asking for this figure back as she feels it is owed to her by the company.
My view to this is she would have to prove that she incurred an expenses that she had to pay for, or prove that she lent the company that money. I have told the current director that i am going to write both of the balancing figures off as an expectional item in the profit and loss, which she is happy with.
What i want to know is does the ex director have any right to this money if she can't prove a penny of it?
Sorry to go on but feel i need to detail the situation in order to get a correct response.
TIA
There were two directors as of Sept 09 when one of them left.
The director who is left intstructed me at the beginning of Feb to process her accounts to 31 Jan 2010
This current director had no involment in the companies accounts and no involvement with the previous accountant, it was all dealt with by the ex director.
My situation is-
After reviewing the work that was done by the previous director for the accounts to 31 Jan 2010 i decided it would be easier for me to start the job again than try to make head nor tail of her work (basically she had no idea what she was doing and no accounting knowledge)
After receiving the opening balances from the previous accountant, it turns out that they had written of amounts to the directors loan account in order to make the accounts balance, this was done purely because the ex directors figures did not make sense.
The ex director is now asking for this figure back as she feels it is owed to her by the company.
My view to this is she would have to prove that she incurred an expenses that she had to pay for, or prove that she lent the company that money. I have told the current director that i am going to write both of the balancing figures off as an expectional item in the profit and loss, which she is happy with.
What i want to know is does the ex director have any right to this money if she can't prove a penny of it?
Sorry to go on but feel i need to detail the situation in order to get a correct response.
TIA
I know nothing of accounts really, but have thought of an additional issue that may arise in this situation.
If this ‘ex’ Director was in charge of the accounts, saw the figures once they came back from the previous accountant and saw the loan account, then, based on this information negotiated a settlement with the remaining director to leave, this figure (in the loan account) may well have been part of that decision, regardless of whether it was spoken about.
So, if subsequent to leaving, the loan account money is not reimbursed, this may materially change the agreement that made this Director an ‘ex’ Director, putting everyone back to square one with an unhappy puppy in the mix to boot.
This may all be nonsense as the ex Director may not have asked for the money and you’re just covering the bases; something to think about and discuss internally though?
If this ‘ex’ Director was in charge of the accounts, saw the figures once they came back from the previous accountant and saw the loan account, then, based on this information negotiated a settlement with the remaining director to leave, this figure (in the loan account) may well have been part of that decision, regardless of whether it was spoken about.
So, if subsequent to leaving, the loan account money is not reimbursed, this may materially change the agreement that made this Director an ‘ex’ Director, putting everyone back to square one with an unhappy puppy in the mix to boot.
This may all be nonsense as the ex Director may not have asked for the money and you’re just covering the bases; something to think about and discuss internally though?
DonnyMac said:
I know nothing of accounts really, but have thought of an additional issue that may arise in this situation.
If this ‘ex’ Director was in charge of the accounts, saw the figures once they came back from the previous accountant and saw the loan account, then, based on this information negotiated a settlement with the remaining director to leave, this figure (in the loan account) may well have been part of that decision, regardless of whether it was spoken about.
So, if subsequent to leaving, the loan account money is not reimbursed, this may materially change the agreement that made this Director an ‘ex’ Director, putting everyone back to square one with an unhappy puppy in the mix to boot.
This may all be nonsense as the ex Director may not have asked for the money and you’re just covering the bases; something to think about and discuss internally though?
As mentioned the current director had no involment in the accounts side of things, the ex director treated her as if she didnt know a thing and insisted she didnt get involved so no arangement was made internallyIf this ‘ex’ Director was in charge of the accounts, saw the figures once they came back from the previous accountant and saw the loan account, then, based on this information negotiated a settlement with the remaining director to leave, this figure (in the loan account) may well have been part of that decision, regardless of whether it was spoken about.
So, if subsequent to leaving, the loan account money is not reimbursed, this may materially change the agreement that made this Director an ‘ex’ Director, putting everyone back to square one with an unhappy puppy in the mix to boot.
This may all be nonsense as the ex Director may not have asked for the money and you’re just covering the bases; something to think about and discuss internally though?
I even spoke to the ex director about this figure and she said she didnt know how they got to it, but she said she wants whats owed to her, basically ive told the current director that the ex directors can take a running jump unless she can prove the figures to the penny then shes not getting a penny, shes also trying to claim use of residence going back to 2007 but i have also said shes missed the boat on that one aswell, by 3 yrs
Also dividends that were taken were illiegal so in theory i should ask her to repay them and tax them under PAYE, basically shes left the current director in the s
t.Thanks for the pointers.
Yes formally taken over.
The balances arise from the first years accounts which were 2007 they changed accountants in 2008, these balances have remained in the accounts since then, the only thing derailed in quickbooks is that it's a balancing item. So the last accounts have no records hense why I'm thinking of writing it off as an exceptional item to get a fresh start, what's your views?
The balances arise from the first years accounts which were 2007 they changed accountants in 2008, these balances have remained in the accounts since then, the only thing derailed in quickbooks is that it's a balancing item. So the last accounts have no records hense why I'm thinking of writing it off as an exceptional item to get a fresh start, what's your views?
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