Ltd company personal bank guarantee help

[TrevorDE]

I'm looking for some help and possibly recommendations for a good, reasonably priced solicitor who can help with my predicament.

 

I am (currently) a director of a small Ltd company. I have been working abroad for the past 2 years and my friend (or so I thought!) and co-director has been running the business.

 

In a nutshell, the co-director has disappeared and is proving uncontactable and has left around £13k in debts (for which I appear to be the sole bank guarantor). I am living and working overseas (not connected with the UK business) and the Bank (HSBC) has allegedly been trying to contact me for several months although I have not received any correspondence from them.

 

I returned to the UK on holiday last month and met with the Bank who were going to investigate, but they have since closed the account and now I have a debt collection agency chasing me personally for the outstanding £13k.

 

There are other issues surrounding the bank account for which I signed as guarantor and cheque signatory, my name was mysteriously removed as signatory (this is something I only just found out about) and this may have contibuted to the debt being run up by my business partner; and I have the feeling that the bank has not been as diligent as they could have been.

 

There are monies owed to the company, and the company has assets (vehicles etc) which may cover some of the debt owed to the bank, but I really just want to break my ties with the company but at the same time limit my liability.

 

All advice gratefully accepted.

[palomino]

Has the company been wound up or is it effectively still running?

Are there any other directors?

Is the director who absconded the MD?

Did he have any personal guarantees in place with the bank (or anyone else)?

Were you officially a non-exec director?

Do you have any other personal guarantees in place?

Are there any other creditors lurking about?

Do you realise you have responsibilities to Companys House?

Who removed your name as a cheque signatory and how did you find out about it?

Are you taking action to recover outstanding debts from debtors?

If you walked away who would run the company?

 

Gets complicated doesn't it!

[TrevorDE]

Has the company been wound up or is it effectively still running? It hasnt yet been wound up but it has effectively ceased trading as the Bank has now stopped the account. There are outstanding invoices and therefore in theory monies should be coming into the account.

 

Are there any other directors? Only the director who has absconded.

 

Is the director who absconded the MD? Yes.

 

Did he have any personal guarantees in place with the bank (or anyone else)? Not with this Bank, but I'm unaware of any other guarantees he may have in place with anyone else.

 

Were you officially a non-exec director? No

 

Do you have any other personal guarantees in place? No

 

Are there any other creditors lurking about? I assume there will be unpaid creditors but dont have access to this information.

 

Do you realise you have responsibilities to Companys House? Yes, I have asked for clarity on this from my accountant (still awaiting his response)

 

Who removed your name as a cheque signatory and how did you find out about it? Good question, I only found out from my business partner (the abscondee) when the company secretary was changed and it was discovered (a least this is what he told me!) that he and the old company sec were the only designated signatories.

 

Are you taking action to recover outstanding debts from debtors? Yes, invoices have been submitted to the debtors (with copies to the Bank) and receipt of funds are being chased. The Bank isnt interested and have referred it to Metropolitan (their debt collectors).

 

If you walked away who would run the company? I'm assuming the abscondee - the biggest problem I have is geographical, living and working abroad makes it impossible for me to run the business and I have been completely reliant on the information provided (or not as the case has been) from the MD and the company secretary.

 

Gets complicated doesn't it!

It certainly does!! Thanks in anticipation.

[palomino]

Ah yes, the Company Secretary.

 

What is the Company Secretary doing about this situation at the moment? Is he/she a relation or friend of the absconded MD? Are they colluding in any way?

 

It sounds as though the bank has been less than diligent as you suggest. As a first step I would ask the bank for copies of all the mandates held for the account. You might have to pay a fee for this service.

This will help track down the historic situation with cheque signatories. If the bank has paid out on cheques improperly signed then you have a claim against the bank. After all the purpose of mandates is to instruct the bank on how to deal with cheques and if they haven't done so according to the mandate then they are in clear breach.

 

If there is any suggestion of impropriety by the absconded MD then maybe the police should be involved. Using company money for private benefit without authority is theft so I think you need to get your accountant to give you a complete and accurate picture of the business at the moment. In particular where the £13K debt came from.

In the worst case you may have to ask the banks for the cheques so you see the payee. In the case of standing orders or direct debits the trail is easier to follow and you should get details of these quite easily.

 

You have a lot of work ahead of you. These matters grind away fairly quietly so you have days/weeks to get organised. You have my sympathy.

 

One further thought: the bank may refuse to give details of the accounts to you as you may not be covered by the mandates any more. This shouldn't be a problem as you are a director and they know the other has disappeared, however if it is then you need to discuss this with a solicitor.

 

I can't recommend any solicitors - I don't even know where you are! - however a good way of finding one is to ask the commercial estate agents local to the business if they can suggest (they won't recommend) a good commercial solicitor. But solicitors are always expensive, good ones even more so. Hence if you can do as much of the groundwork as possible it will help keep the bill down.

[TrevorDE]

Ah yes, the Company Secretary.

 

What is the Company Secretary doing about this situation at the moment? Is he/she a relation or friend of the absconded MD? Are they colluding in any way? Well, its funny you should raise that question! The new Company Secretary (also the book keeper) is indeed a friend of the MD and has on a number of occasions ignored requests from me for information on the status of the business finances (which is what raised alarm bells wih me originally) although I have been assured by my accountant that collusion is extremely unlikely.

 

It sounds as though the bank has been less than diligent as you suggest. As a first step I would ask the bank for copies of all the mandates held for the account. You might have to pay a fee for this service.

This will help track down the historic situation with cheque signatories. If the bank has paid out on cheques improperly signed then you have a claim against the bank. After all the purpose of mandates is to instruct the bank on how to deal with cheques and if they haven't done so according to the mandate then they are in clear breach. I've made the request, although expect that they will just refer me to Metropolitan as the matter is 'out of' their 'hands'. If I as director have not signed over my rights as signatory then does it automatically follow that any subsequent payments the bank has honoured have been at their risk (and therefore liability)?

 

If there is any suggestion of impropriety by the absconded MD then maybe the police should be involved. Using company money for private benefit without authority is theft so I think you need to get your accountant to give you a complete and accurate picture of the business at the moment. In particular where the £13K debt came from. I will follow this up with the accountant. The finances are recorded in Sage therefore the information should be readily available.

 

In the worst case you may have to ask the banks for the cheques so you see the payee. In the case of standing orders or direct debits the trail is easier to follow and you should get details of these quite easily. A good deal of the payments made would most likely have been electronically - I'm assuming the same mandate rules apply?

 

You have a lot of work ahead of you. These matters grind away fairly quietly so you have days/weeks to get organised. You have my sympathy.

The Bank and their debt collectors have allegedly been trying to contact me for several months although I have not received any correspondence from them at my overseas address. I have pointed this out to them but nothing seems to have been done to rectify the situation and I am yet to receive one letter. My concern is that they may take legal action against me whilst I'm abroad and which I am unaware of - can this be done?

 

One further thought: the bank may refuse to give details of the accounts to you as you may not be covered by the mandates any more. This shouldn't be a problem as you are a director and they know the other has disappeared, however if it is then you need to discuss this with a solicitor.

 

I can't recommend any solicitors - I don't even know where you are! - however a good way of finding one is to ask the commercial estate agents local to the business if they can suggest (they won't recommend) a good commercial solicitor. But solicitors are always expensive, good ones even more so. Hence if you can do as much of the groundwork as possible it will help keep the bill down.

 

On a general note regarding he finances, do the MD and Company Secretary have any responsibility for debts as they have effectively been managing the business or does it all come down on me as the bank guarantor, in spite of the fact I have been living and working abroad for the past two years?

 

Thanks for your help!

[toddle2u]

Be realistic about this. You want to spend more money on a solicitor chasing your Co-Director for things that may well be impossible to prove and he may not have the money to repay anything anyway

 

Action plan

 

1. Chase Debtors for payment

2. Sell Company assets

3. Don't pay any other creditors apart from bank

4. Do a deal with the bank on a repayment basis

5. Forget accountant - just running up more debts. Companies House are toothless

6. Seek Insolvency advice on behalf of the Company from an IP

 

Don't know where you are in Country but if you want a decent IP Pm me. Have one in South, North and Mids

 

Toddle

[TrevorDE]

Be realistic about this. You want to spend more money on a solicitor chasing your Co-Director for things that may well be impossible to prove and he may not have the money to repay anything anyway

 

Action plan

 

1. Chase Debtors for payment

2. Sell Company assets

3. Don't pay any other creditors apart from bank

4. Do a deal with the bank on a repayment basis

5. Forget accountant - just running up more debts. Companies House are toothless

6. Seek Insolvency advice on behalf of the Company from an IP

 

Don't know where you are in Country but if you want a decent IP Pm me. Have one in South, North and Mids

 

Toddle

Excuse my total ignorance but I'm assuming that an IP is necessary to wind up the business? If however I resign as a director am I still responsible for appointing an IP or does this rest with any remaining directors/the company secretary? I'm also assuming the IP will review the company finances and provide me with advice, but could they represent my interests and negotiate with the Bank/debt collectors?

 

I think the bank may well have cocked up and not followed instructions detailed within mandates and allowed payments which strictly speaking should not have been made - this is something I will pursue.

 

Chasing debtors for payment is something I can do remotely and which I'm actively pursuing, but its the lack of any written contact received either from the Bank or the debt collectors that concerns me and whether they can take enforceable legal action in my absence?

 

My biggest problem is one of logistics and the fact that I currently live and work abroad and can only pop back for a few days at a time and probably not long enough to track down the assets whereabouts and attempt to sell them.

[surfaceagentx20]

To get to the bottom of this, you will need to investigate the circumstances surrounding the removal of your name from the bank mandate. Ask the bank to provide you with copies of the forms which were supplied to them giving rise to the change. Those forms ought also to include a memorandum of a resolution of the Board to change the bank mandate.

 

If the resolution was passed whilst you were absent there may be grounds for supposing the bank failed in its duty when accepting the resolution and hence, there may have been a breach of the bank mandate. Payments made out of the account in breach of mandate may not be recoverable from the company and hence not recoverable from you under the PG, particularly those payments which were not payments made to genuine creditors of the company. I am particularly thinking of payments made out of the account to directors as bonuses for example.

 

Do you have a copy of the PG? Does it include any provision relating to where the bank may serve legal proceedings? Does the bank know you are living overseas and if so, do they know where you now live? Do you own any land or other valuable property in the UK which the bank know about or are likely to know about easily?

 

Having answers to these questions will give us an idea how easy or difficult it will be for the bank to succesfully and economically prosecute a claim. The banks don't prosecute claims under PGs unless it will be worth it.

 

x20

[TrevorDE]

To get to the bottom of this, you will need to investigate the circumstances surrounding the removal of your name from the bank mandate. Ask the bank to provide you with copies of the forms which were supplied to them giving rise to the change. Those forms ought also to include a memorandum of a resolution of the Board to change the bank mandate.

I've asked the bank for copies of all mandates - they've referred the matter to Metropolitan as HSBC say the account is no longer running. I'm certainly unaware of any resolution and would have expected to sign such an undertaking.

 

If the resolution was passed whilst you were absent there may be grounds for supposing the bank failed in its duty when accepting the resolution and hence, there may have been a breach of the bank mandate. Payments made out of the account in breach of mandate may not be recoverable from the company and hence not recoverable from you under the PG, particularly those payments which were not payments made to genuine creditors of the company. I am particularly thinking of payments made out of the account to directors as bonuses for example.

Noted.

 

Do you have a copy of the PG? Does it include any provision relating to where the bank may serve legal proceedings? Does the bank know you are living overseas and if so, do they know where you now live? Do you own any land or other valuable property in the UK which the bank know about or are likely to know about easily?

I dont have a copy of the PG - I've requested this.

 

The Bank does know I am living overseas and back in April I provided them with my PO Box address for correspondence purposes (as I wasnt getting any joy obtaining financial information on the account either from my co-director or the company secretary). However, I have never received any correspondence from the Bank, which I confirmed by fax on a number of occasions and again when I personally met with the Bank Manager in August.

 

I dont own any property or land in the UK.

Having answers to these questions will give us an idea how easy or difficult it will be for the bank to succesfully and economically prosecute a claim. The banks don't prosecute claims under PGs unless it will be worth it.

x20

Noted. Do you know what implications this will this likely have on my own personal credit rating if and when I decide to return to the UK?

[TrevorDE]

Well the Bank have referred me to Metropolitan to answer all my requests and Metropolitan are refusing to provide any information to me - just repeating the mantra that I should pay off the entire debt run up by my colleague and wont enter into any dialogue with me. Very helpful lot these debt collectors!!

 

I'm really torn on the course of action to take:

1. do I resign rom the company and walk away, and hope that as I'm abroad the debt collectors cant/wont chase me for the debt?

2. If 1, can the debt collectors obtain a judgement against me which will prevent me obtaining any credit when I return to the UK

3. Do I stay as a director, appoint an IP and liquidate the company?

4. Do I stay as a director, try and chase creditors and sell assets (a difficult/impossible job seeing as I'm abroad) and then try and negotiate on the balance owed to the bank?

5. Contact the police about my disappearing co-director and raise my suspicions on his possible impropriety?

 

All advice gratefully received.

Edited September 16, 2008 by TrevorDE

[palomino]

You don't really need all this hassle.

 

How many debtors [people who owe you money] are there? How much is owed? Do you have all the records if any debtor disputes a debt? Is there any uninvoiced work? Do you have sufficient records to raise invoices for this?

 

I would get as much as you can as quickly as you can (use a debt collector ho ho). Pay off what you can. Resign you directorship, and then disappear.

 

Contacting the police is a good idea in theory, however they take forever to carry out these types of investigations, and will almost certainly want more and more information from you which, because you are not in the UK, you will very difficult to provide.

 

Which part of the UK are you in (while you're here)?

[TrevorDE]

Yesterday, my parents in the UK received a telephone call from Westcot Credit Services asking for me but they were advised I am no longer at that address. Westcot said they would mark the file acordingly and not contact them again. This morning my parents received a letter dated 29.05.09, as follows:-

 

Client Ref.XXXXXX Client: Metropolitan Collection Services HSBC Bank PLC Balance: £5,192.90

 

Dear Mr XXXXX, Why are we writing to you? Westcot Credit Services Limited is a specialist debt collection company and this letter gives you notice that we have been instructed to collect the outstanding balance on the above account.

 

The above address was provided to us by Experian, as a possible forwarding address for you. Experian is a credit reference agency and holds data on credit and financial agreements, electoral roll information and other public domain data. This data shows a link between a previous address and the above address.

 

What should you do now? Either - 1. If you have any reason to believe this is not your account you should contact us on 0870 902 0587 or write to us at the above address, quotin the Wescot Debt.No. We may be able to assist you in obtaining further information about thi link and advise you what to do if it is incorrect. You can also simply return the mail to us marked not at this address. WE CONFIRM THAT WESCOT HAS NOT REGISTERED ANY DEBT AGAINST YOUR NAME OR THE ABOVE ADDRESS IN RESPECT OF THIS MATTER.

 

Or. 2. Contact us immediately to arrange payment. You can pay by credit or debit card either on line at www.paywescot.co.uk or by calling us on 0870 902 0587. You an also all us on the same numer to arrange to pay by standing order or Giro. Alternatively, you can pay by cheque or postal order, made payable to Wescot Credit Services Ltd. quoting the Wescot DebtNo. on the reverse.

 

We can be contacted 7 days a week as follows:- Mon-Fri. 8am - 9 pm Sat.8am - 4 pm. Sun. 9am - 4 pm.

 

IF YOU IGNORE THIS LETTER THE ACOUNT WILL BE REFERRED TO OUR COLLECTIONS TEAM FOR FURTHER ACTION.

 

At the end of last year I resigned from the Company and heard nothing until yesterday. It is clear that Metropolitain and HSBC have ignored all of my previous requests for information, as well as my notification that I am living abroad and have now instead passed the debt to Westcot who have decided to harass my elderly parents.

 

Shall I just ask my parents to mark the letter ''NO LONGER AT THIS ADDRESS, RETURN TO SENDER''? Or should they just ignore the letter? Or do something else?

 

Should I write to Westcot from my overseas address (a PO Box) and advise them to stop harassing my parents and correspond with me here? Does anyone have any advice on what action I should take?

Thanks in anticipation.