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Director disqualification: the how and why

The reason for director disqualification is still unclear to many people. For the avoidance of doubt, having a company liquidation recorded against you doesn’t not automatically prevent you from acting as a director. Rather than being dealt with by the insolvency act, director disqualification is dealt with under the Company Director Disqualification Act 1986 as there are reasons for disqualification outside of insolvency. What does director disqualification mean? Director disqualification has the following consequences: Prohibition from acting as a director of a company or LLP which is registered or trades in the UK. Prohibition from taking part in the promotion formation or management of a company or LLP. Inability to act as an insolvency practitioner. Restrictions on acting as a solicitor, barrister or accountant.

What are illegal dividends?

Illegal dividends, or unlawful dividends as they are also known, is when there are insufficient retained profits within the company to cover the dividend being paid. The technical definitions of this can be found at Section 830 of the Companies Act 2006 and reads as follows: “A company’s profits available for distribution are its accumulated, realised profits, so far as not previously utilised by distribution or capitalisation, less its accumulated, realised losses, so far as not previously written off in a reduction or reorganisation of capital duly made.” Dividends vs Salary A director of an owner managed business, where they are the sole director and shareholder, may ask why not just keep things simply and just receive a salary. The popularity of the split between dividends and salary is due to the tax benefits this arrangement achieves:

How assets are sold in insolvency

Pre-pack asset sales can often be viewed suspiciously. The sometimes high profile of these cases then leads to a misconception that assets are just sold back to company directors for rock bottom prices. This is rarely the case and this article will aim to deal with these misconceptions. The breakdown In 2014 Teresa Graham produced her report to Vince Cable into the implications of pre-packed sale in administration to connected parties. Following the “Graham review” pre-pack sales are even more highly regulated and insolvency practitioners are fined and reprimanded for not following the professional standards set out in SIP 16. If a pre-pack sale is made to a connected party the insolvency practitioner must: Demonstrate that the sale represents the highest achievable value for the business. Invite the party to make submissions to […]

Retention of Title Guide for Directors

Retention of Title or ROT as it is more commonly known is an instrument in supply of goods contracts whereby the supplier will attempt to take security over assets provided by retaining legal ownership until payments has been received. If you have been unable to pay a creditor and they are no longer willing to wait for their money they may approach you or turn up at your premises advising they have ROT a demand to remove their goods. It should be noted that the courts have repeatedly confirmed the onus is on the supplier to ensure the clauses and validly constructed, incorporated and enforced. Therefore, if they are being overly aggressive they may be trying to ensure you do not have time to take advice.This guide will advise you on common pitfalls and how […]

Practical steps to take prior to closing my company

All insolvency practices will take you through the legal steps, but it is also important to consider the practical steps that you should take to achieve the best outcome, both for creditors and for you. HM Revenue & Customs You should firstly ensure that you have completed all outstanding returns for PAYE, Corporation Tax, VAT and any other industry specific taxes you are required to pay. This will act to limit the liabilities to HMRC by reducing any outstanding penalties and actual return amounts are usually lower than the assessments that will be raised by HM Revenue & Customs. In particular bringing PAYE records up to date and arranging for P45 returns to be submitted will make claiming outstanding entitlements from the […]

Changes to insolvency law: Need to know basis

The final article in this series covers off a number of ways processing of information will occur under the new rules and also acts as a coverall for a few of the miscellaneous provisions which are also of import.   Statement of affairs Along with all of the other statutory forms, there will be a significant change to the information provided in the statement of affairs. It has been identified that as the statement of affairs is an item of public record and is at risk of divulging personal data which some parties would prefer not to be published. Accordingly the new rules state that employee and customer details should be set out in a separate table and this will not be placed on the public record. Instead there will be […]

Changes to insolvency law: Receiver or official receiver

As well as insolvency practitioners in private practice, a number of the new rules also affect the role of the official receiver and the number of insolvency cases they are involved with. Interim receivers It is often the case that only the official receiver will be appointed as interim receiver between the presentation of a bankruptcy petition and the making of a bankruptcy order, rather than an Insolvency Practitioner in most cases. This has changed under the new rules allowing the option of the official receiver or an insolvency practitioner as designated by the applicant. Whether there is a large uptake in creditors seeking to appoint insolvency practitioners into this role will remain to be seen.

Changes to insolvency law: saving trees

A lot of work in insolvency has historically involved sending pages and pages of documents through the post which to many will have very little meaning. The good news is, this now all encouraged to be sent by e-mail. Use of electronic communication The changes in the Insolvency Rules in 2010 allowed for Insolvency Practitioners to send out notices and information by e-mail. This was only allowable where creditors had specifically consented to the Insolvency Practitioner that they were happy to receive communication by e-mail. The consent procedure was often disregarded by creditors and therefore resulted in the standard practice of all information continuing to be sent by post. The changes to the rules means that where a creditor […]

Changes to insolvency law: the end of the round table

One of the major changes, particularly with the first meeting of creditors to place companies into liquidation, will be that physical meetings will no longer be an option, unless specifically requested by the required level of creditors. Whilst this may seem like a new advancement, the previous Insolvency Rules have allowed for virtual meetings since 2010 and the team at Robson Scott Associates have been conducting meetings in this fashion since 2011. Our experience is that these meetings are far more efficient and the uptake within the profession has been so low that the law makers have decided to now enforce this. The new decision making and consent procedures are described as follows. Deemed Consent Under the first process notices can be sent […]

Changes to insolvency law: an introduction

From 6 April 2017 the most radical change to insolvency legislation in 30 years will come into effect laying way for huge changes to the way insolvency cases are managed…… or not. Whilst the changes are significant to our view they are 10 years behind the rest of the world and are now only just starting to catch up. This series of blog posts will introduce the new rules and how they will affect you and your clients when considering entering insolvency proceedings. These posts will also take you through the “innovations”, now enforced upon Insolvency firms, which the team behind Business Rescue Expert have already been incorporating into practice for a number of years.
By |February 23rd, 2017|Insolvency|0 Comments