Highlights:

• Claim: £111,909
• Type: Overdrawn directors loan account
• Settlement: £55,200 payable within six months

Background:

The company was the subject of a winding up petition presented by HMRC mid 2013. Subsequently, an Insolvency Practitioner was appointed Liquidator of the Company.

The last filed accounts were prepared to year end 2011.  Draft accounts had been prepared for year end 2012, but these were never finalised or filed.  The draft accounts showed an outstanding directors loan account of some £10,000, but only with the account having been reduced by £40,000 of “interim dividends”.

The Liquidator’s review of the Company’s affairs post year end 2012 identified further payments to the director of £62,000.

The Liquidator wrote to the director claiming £112,000, representing the overdrawn loan account at 2012 of £10,000, £40,000 of illegal dividends declared in 2012 and the payments of £62,000 made to the director post 2012.

The sheer scale of the claim led to the director becoming “paralysed” (not literally but you know what we mean!) and doing nothing.  He didn’t really understand why the claim was being made and his response was to do nothing and hope it would go away.

Unsurprisingly, it didn’t and the Liquidator, having had no response, was on the verge of issuing proceedings when the director was referred to us.

Our role:

PGUK were able to explain the nature of the claim to the director.  In particular, that it was a legitimate claim against him and why that was the case.

Having accepted the validity of the claim, the director then became fixated with the value of it and felt that he had no financial means to pay it.

PGUK were able to analyse the director’s personal financial circumstances and advise him of his options.  By explaining what level a sensible commercial offer should be, based upon his financial position, the director could then focus on what he could achieve rather than what he could not.

A SFC was prepared and submitted to the Liquidator.

 

SFC Summary:

Income and expenditure

A small monthly surplus on the joint household expenditure but not enough to make a sensible offer.

Assets and Liabilities

The director’s assets comprised his 50% beneficial interest in the family home and three small buy to let properties.  The available equity, after costs of sale, was circa £60,000 (based on “forced sale” values).

He had other unsecured debt of some £35,000 which was being serviced.  His only real problem was the claim against him from the Liquidator.

The Estimated Outcome in the event of Bankruptcy was, as estimated at some 25p in the £.

Final Outcome:

PGUK was able to negotiate a final settlement of £45,000 with an initial lump sum payment of £15,000 to be paid immediately and the balance to be paid within 6 months, following a sale of the buy to let properties (the properties were already being marketed for sale).

The properties sold within the agreed time period (just!) and the £30,000 paid across to the Liquidator.

The Liquidator received a recovery in a relatively short period of time, he had avoided the costs of issuing proceedings which, given the director’s financial circumstances, would not have been recovered and he could now move the case to closure.