Statement of Financial Circumstances – Case Study One


  • Claim: £50,000
  • Type: Overdrawn directors loan account
  • Settlement: £45,000 payable over 18 month


The company was the subject of a winding up petition presented by HMRC.  Subsequently, an Insolvency Practitioner was appointed Liquidator of the Company.

The last filed accounts had no overdrawn loan account position.  However, the Liquidator’s review of the Company’s affairs post year identified  payments to the director of some £50,000.

Upon receipt of the claim, the director responded, through his accountant, who claimed that no moneys were payable for the following reasons:

  • The director had a personal guarantee obligation for £20,000
  • £24,000 of dividends had been declared and accounted for on the directors tax return for the relevant tax years; further, although acknowledging that accounts had not been prepared for the period, the accountant advised that had they been, there would have been sufficient reserves to allow for the dividend to be declared
  • The director had paid an estimated £8,000 of expenses on behalf of the Company (based upon an average of those incurred in previous years)
  • A Company which the director was associated with had made payments on behalf of the insolvent Company of some £10,000

The Liquidator unsurprisingly rejected all of the arguments put forward.  However, the accountant was nothing if not persistent, the same arguments being put forward on several further occasions to the point where the liquidator was faced with little other choice than to instruct solicitors and consider the issue of proceedings.

We were contacted and met with both the accountant and his client.

Our role:

PGUK were able to explain that whilst we had some sympathy for the arguments put forward (as would the Liquidator) they had no defence to the claim, explaining why this was the case and why the Liquidator was taking the stance that he was.

They both grudgingly accepted that this was the case and we were instructed to assist with the settlement.

PGUK contacted the Liquidator and obtained a short period of grace within which we could assess the director’s personal financial circumstances and advise him of his options

A SFC was prepared and submitted to the Liquidator.

SFC Summary:

Income and expenditure

The directors new Company was trading well and could fund a “reasonable” monthly payment in order to propose a deferred settlement of the claim.

Assets and Liabilities

The director’s assets comprised his sole beneficial interest in his home with available equity, after costs of sale, of in excess of £100,000, even based upon on a “forced sale” value.

He had little other unsecured debt, having recently settled his personal guarantee obligation.  His only real problem now was the claim against him from the Liquidator.

The Estimated Outcome in the event of Bankruptcy was, as estimated a full recovery.

Final Outcome:

The director had equity, but no available cash or ability to borrow to settle the claim.  But he could propose a deferred settlement from future income.  It was explained that his asset position was such that the settlement figure would be not insignificant, particularly as it would be on deferred terms and that he did have a great deal of equity to protect.  This was accepted and understood.

PGUK was able to negotiate a final settlement of £45,000 to be paid over a period of 18 months.  The arrangement is now ongoing.

The Liquidator resolved the claim within 6 weeks of our initial instruction.  Communications between the Liquidator and the director and his accountant had been ongoing for well in excess of 18 months.  The additional costs of issuing proceedings had been avoided, which was in the director’s interest, as they would have been recovered in full, together with interest had the matter proceeded through litigation.

Gary Addison About Gary Addison

I am a co-owner of Personal Guarantees UK Ltd. As Business Development Director I am responsible for developing new relationships with insolvency practitioners, solicitors and accountants who can refer clients with personal guarantee issues.

Personal Guarantees UK Ltd can help directors and individuals of failed companies negotiate and settle personal guarantee claims and other claims arising out of insolvency.