Personal Debt - Ltd company Accounts

[P4010]

Hi all,

 

I posted a question mentioning this point yesterday and got a brief answer kindly from another member but have today received conflicting advise so i wonder if anybody could clarify the following:

 

I have personal debt.

I am the director, and sole employee of my Ltd company.

I pay myself a small salary, in order to try and acheive a healthy business cashflow in order to see myself (salary) and my business running costs through any hard times in the future.

 

Can my personal debt, be taken from my Ltd company profits/Cashflow/Bank account.

Or

Is my personal debt only able to be taken from what my Ltd company pays me as an employee. (salary)

 

I hope this makes sense and clarification would help me no end.

 

Thank you all for any input

 

P

[BRIGADIER2JCS]

Person and business accounts should be seperate

entities and there should not be any facility to offset

one against either.

[P4010]

Thanks Brig, I'm trying to find a way to get this confirmed for sure, Some people say this is the case and some say that the money in my business is liable to be taken by DCC against my debts, because it is my company, and my money ultimately.

 

Hope others have an opinion to sway one way or the other.

[BRIGADIER2JCS]

I cannot see that the ''accounts' can be in anyway open

to being ''offset'' you are a salaried employee as I read it

the business entity is totally divorced from your private

and personal account, if otherwise where is the protection

provided to the directors of a Ltd., company??

[Eduin]

I cannot see that the ''accounts' can be in anyway open

to being ''offset'' you are a salaried employee as I read it

the business entity is totally divorced from your private

and personal account, if otherwise where is the protection

provided to the directors of a Ltd., company??

 

Surely their argument is that this company is an asset owned and controlled by the individual and as such can be considered in terms of an individuals means to repay debt. If they have already gone to this trouble they may be considering an enforced bankruptcy so the Receiver is responsible for disposing of the assets in favour of creditors. If it is a substantial debt (or the creditor is Amex) then this needs to be considered.

[BRIGADIER2JCS]

IT is a limited liability company, therefore the directors person accounts

and assetts are not at risk.

Any ''liability'' must be recovered from the companies assetts.

[Eduin]

IT is a limited liability company, therefore the directors person accounts

and assetts are not at risk.

Any ''liability'' must be recovered from the companies assetts.

 

You are correct that debts of the Ltd Company can only be pursued versus the assets of the Ltd Company.

 

But thats not the OPs question. He's asking if his asset (the business) can be pursued for his Personal debts. It can. Of course if its a family member who owns the business and he has not had any ownership interest for at least 6 years this is moot. My assumption is that he is the shareholder as well as director (it sounds likely).

 

Whether they will or not, of course, is the risk. Personally I'd await a court summons for bankruptcy proceedings then agree to pay (probably at a small additional cost for initial solicitors costs) or take a Settlement if its attractive. Initial cost to the stage of issuing a summons shouldnt exceed £600. Obviously if the bankruptcy is declared the Receiver will get his £12k as well as the creditors getting their money.

[ims21]

A limited company is not an "asset" of a person Eduin.....it is a separate legal person, able to make contracts, take actions etc in its own right.

 

We don't know what this debt is but the company does not have to pay your personal debts.

 

We will of course assume that the PAYE on your salary and any tax on dividends paid to you is all in order.

 

You use the phrase "able to be taken"....who is trying to take? Some more info would be useful I have to say.

 

ims

[Eduin]

A limited company is not an "asset" of a person Eduin....

 

OK Ill clarify. If the individual benefitting from a tax avoidance shell company is the only or main shareholder (extremely likely) that shareholding is an asset. In the event of that individuals bankruptcy that shareholding is passed to the Official Receiver who would, in all likelihood, liquidate the company to pay off the bankrupts debts. If the entire shareholding is outside the individuals name, this can be avoided but only if that has been the case for at least the last 6 years.

[ims21]

OK Ill clarify. If the individual benefitting from a tax avoidance shell company is the only or main shareholder (extremely likely) that shareholding is an asset. In the event of that individuals bankruptcy that shareholding is passed to the Official Receiver who would, in all likelihood, liquidate the company to pay off the bankrupts debts. If the entire shareholding is outside the individuals name, this can be avoided but only if that has been the case for at least the last 6 years.

 

Who said anything about a tax avoidance shell?

 

Who said anything about bankruptcy?

 

The OP has asked a simple question and the answer is that his company is not liable for his personal debt

[BRIGADIER2JCS]

It matters not the two are separate enitities.

[Eduin]

Who said anything about a tax avoidance shell?

 

Who said anything about bankruptcy?

 

The OP has asked a simple question and the answer is that his company is not liable for his personal debt

 

That advice to the OP suggests that a creditor cannot leverage his company value against his debt. But its not true for the reasons I explained above. I mentioned bankruptcy because its the easiest way for a creditor to leverage a cash rich company (as he describes his company as able to provide him a future income this is a reasonable assumption) an individual owns against a debt the individual is responsible for. There are methods to obtain court order for payment short of bankruptcy but as they are convoluted a creditor who decides to go down this route would issue a bankruptcy petition against the individual.

 

It sounds like a shell company but perhaps it isnt. That wont actually matter to a creditor, he is the sole employee and, presumably, the sole shareholder.

[Eduin]

It matters not the two are separate enitities.

 

If the individual owns the shares they are an asset which is a basis for recovery.