Bankruptcy for LTD business

[tiaposy]

I don't know if anyone can help with this but I desperately need some

advice. We run a LTD company.Our old accountant completed our books in Feb 2006 and left us an invoice for £1637.36.

Due to money problems we have never paid him and to be fair he has never chased us - he has our phone numbers & email address even though we had moved. (He still has these books - we have never had a copy).

 

We now have a new accountant and he contacted the old one to get copies of our books. The old one said he was reluctant to do this as we hadn't paid him - fair enough. We told our new accountant that we hadn't paid him and he said not to worry about it.

Now this morning I have a letter stating if we don't pay the full amount by next friday he will commence bankruptcy proceedings against us as directors.

 

1. Can he do this - why isn't he threatening to take us to court instead?

2. Can we ask for time to pay? (I know its been over a year, but we do not have that sort of money at the moment)

3. How can he put interest on the amount - we never signed anything as far as I know & he hasn't broken it down.

Please help as I feel sick right now...

Thanks

[gimp0r]

in answer to point 3. you may find this informative

Late Payment of Commercial Debts (Interest) Act 1998

The Late Payment of Commercial Debts Regulations 2002

 

if you would like a more easily understandable version then this site is pretty good Late Payment Penalties in the UK

[buzby]

It's a clever move, he knows that there is little point pursuing the Limited company for payment, however if he was instructed to do the accounts by as director of the company, then it still remains the company is the entity he must sue, UNLESS you provided him with an indemnity or other letter that advised his appointment was being personally underwritten by a/the directors. If he's not got this, he can whistle - his action is not competent.

 

Why not write back, explaining that you are prepared to offer a number of staged payments to clear the debt, however as he acted on behalf of the company, any action against the individual directors will be challenged as incompetent (after all, why go to the bother of being Ltd?).

 

Once he knows you know, it may help broker a deal.

[tiaposy]

Thanks for this. We have asked our new accountant to take a look at the letter (which wasn't sent by recorded delivery) to see if he can help.

I am 99% sure we did not sign an indemnity as Directors, however I cannot be sure. (I know we signed one for our overdraft & business loan with the bank).

It isn't that we wont pay, to be fair, we thought he would catch up with us sooner or later. Can I send a letter, asking for a copy of the invoice to perhaps delay a little bit. Also, what about our books that he has and we haven't had sight of since we gave them to him in November 2005!

[buzby]

I'd expect your bank to have that indemnity, but not your accountant. If you have his invoice, is it charged to the Ltd Co or a named director without reference to the Ltd co? If the former, he's shot himself in the foot big time!

 

You could write back (as the Ltd Co) saying the reason the account wasn't settled ages ago was because your books had not been returned, so the matter is still outstanding. Once you have these back, you will arrange for payment to be made.

 

He's not allowed to hold your financial records to ransom, and you could sue him for their return regardless!

[tiaposy]

Thanks Buzby, you have given me something to work on. I do have the invoice somewhere and I am sure it is made out to our company.

Thanks again, and once we get some bank charges back I will be making a donation to this amazing site!!

[buzby]

Happy to help - but do update the thread and let us know the outcome!

[tiaposy]

Sent a letter today by recorded delivery basically asking for a copy of a signed indemnity from the Directors, a copy & breakdown of the invoice & our books/accounts that he had since Nov 2005.

I will let you know what happens!

[buzby]

See... you're enjoying this already!

[tiaposy]

Ooh yes, can you tell?! Hopefully it will put him off for a bit as he said we had until 10.00am tomorrow morning to pay. I had an appointment with my new accountant on Tuesday, even swapped my shift, however I got stuck at work so didn't make it! Lets hope he doesn't have an indemnity letter....

[powelll]

You may also want to speak to Business Debtline on 0800 197 6026 as they specialise in advising sole traders & Ltd companies in relation to this type of thing; it's free & confidential ( no reflection on your excellent advice by the way Buzby! ).

[Dave44]

tiaposy

Don't worry he can't make you Bankrupt.

 

I've been down this road with a Ltd Company that in the end I had to let go. They will try it on in the hope that they can get something out of you but they can't take you to Court for it.

 

If the invoice is to the Ltd. Co. - and it will be as the books are for the Ltd. Co. and it is the Ltd. Company your accountant would expect to pay him, then there is no way he can expect you to pay. The debt belongs to the company not you. Also as Busby says he cannot hold on to your books and is breaking the Law in doing so.

 

Have a good weekend and Don't Worry

[tiaposy]

Powell & Dave44 - Thanks for your advice. I know he has signed for the letter this morning, so I shall wait & see what the postman brings. I am not too worried - have been down this road so many times with various debts, and the many joys of running our own business! Worrying wont change anything

[twitter]

A LTD co. cannot be made bankrupt but they can be 'wound up' in a County Court with insolvency jurisdiction.

[pugsley]

His actions in retaining your books is surely theft, if you can get him to refuse to hand them back in writing, this will surely be proof enough.

 

I would personally try to end this amicably, he did you a service and should be paid (even in instalments if necessary), why make an enemy out of him. Karma and all that.

[buzby]

Theft? Not even with a following wind could this be remotely suggested. The books were required for him to undertake the task he was required to do.

[pugsley]

at first it would not have been theft, but now surely after they asked for them back it is

 

The actus reus of theft is usually defined as an unauthorised taking, keeping or using of another's property which must be accompanied by a mens rea of dishonesty and/or the intent to permanently deprive the owner or the person with rightful possession of that property or its use.

[buzby]

Nope. A prosecutor would have to prove intent - and that would be missing in this case. As an 'incentive' to pay on time, it's no different. Civil recovery would be the only route.

[pugsley]

I would have to agree to disagree on this, but know the police are unlikely to act on it as a similar thing has happened to me. If the books become useless due to time, then the intent is there, as I said he needs to get the refusal in writing.

[powelll]

From what I gather ( my OH is self employed as are several of our friends ) it's common practice for accountants to keep hold of the 'books' in the cases of non payment. I'm not sure of the legality of this practice but it's pretty widespread as it's referred to in the link below:

 

National Debtline England & Wales | Debt Advice | Factsheet 04 How To Deal With Business Debt

[pugsley]

ACCOUNTANTS' BILLS

 

If you have an accountant who usually deals with your tax returns you may have a problem if you are not up to date with their bill. Sometimes accountants refuse to complete tax returns or give you back your books if they have not been paid. This can cause problems with HMRC if they have sent you an estimated tax bill that is too high.

• If you cannot get your books back try to give HMRC a summary of your trading figures from any papers you have.
  
• Tell HMRC why you have no books. Ask them to accept your estimate even if you have no papers to prove your figures.
  
• Try to negotiate with your accountant to give your books back. They may agree if they can see you are in no position to make any sort of payment to them or you may be able to make an agreement for a part payment instead.

interesting maybe they have a get out of jail free card, although they probably deserve it for doing such an awful job, I'm studying accounts at the moment towards a conveyancing qualifications and it is very tedious.

 

 

 

What if My Accountant Refuses to Return My Books?

 

If you have not paid your accountant, then he or she may refuse to give your books back to you until the bill is paid. This is known as a lien.

 

Essentially, the accountant has the right to keep the books on which work has been carried out, and for which some or all of his or her fees have not been paid.

 

He/she should not be keeping books for which there is no debt due on the work done. A lien is not enforceable in bankruptcy or in liquidation situations.

 

You should contact your accountant and explain that you are unable to pay, and that the return of your books will help you put together some repayment proposals, which should result in a better offer to the accountant than would otherwise be possible.

 

This is particularly significant where there are income tax or VAT assessments to be dealt with, which could result in refunds.

 

You could take legal action to recover your books, but it is important that you get a professional opinion from a solicitor.