letter from liquidators from company dh used to be director on - advice needed.

[mycatoscar]

Am very worried and wondering if anyone can give me any advice on what to do next.

DH worked for my father for approx 10 years in a building company. At first just as an employee and then from 2007 as a director of the limited company.

The directorship was in name only (meaning that he was never allowed near the running of the company) but it was his employment title. He had 10% in company shares.

My father treated him like shit and 'stole' money from him left right and centre under the guise of the company. He was never allowed access to financial records or to the organisational side of it. My father bullied him for years.

In dec 2011 dh finally got the confidence to quit, both as employee and director and went sole trader as a carpenter. He is doing great, and slowly building up a client list, all was much more positive and we are getting on with our lives..

This morning we get a letter through the post from a liquidator, apparently my fathers company has taken 'Creditors voluntary liquidation' and they are asking for lots of information on dh about when he was director.

I am assuming that we do have to answer this letter (legally speaking)? But am very concerned that given the past history between dh and my father (also I am now estranged from him for about 18 months) that I would not put it past him to have done all kinds behind my dh's back with regards loans and re-mortgages in the company's name (he did the same to my mother and she only found out when they divorced).

Seeing as dh has not been director since dec 2011 can he be held liable for any debts owed by the ltd company?

Any advice on how to proceed would be really gratefully received.

I'm not a lawyer, but I do know that your DH cannot be held liable for debts of the company - that is one of reasons why people set up companies, rather than just operate as a sole trader/partnership.

Was your DH an official director? Ie was he on the Companies House register? If so, liquidator will initialy assume he was involved in board meetings and company decisions (ie what the board of directors actually did). However, even if he was, if he can prove he did not attend any board meetings and your father effectively made all decisions, then this would be taken into account.

If your DH was only a director in name, and was never on the Companies House register, then it should be very straightforward for him to tell them he took no part in decision making.

The important thing will be for your DH to be very open an honest with the liquidator. If you feel, however, they are trying to suggest your DH was involved in criminal transactions (e.g. Fraud) then I'd get a lawyer to advise you immediately. If your DH "forced " to sign any documents e.g. Your dad saying ,just sign this and don't ask questions - then definitely get legal advice.

Sorry I've withered n, and no doubt in the meantime you will have been offered much more sage advice.

Thank you PoppadomPreach (love the username!), as far as he can remember he wasn't asked to sign anything that was untoward but I simply do not trust my father.

It did occur to me that they may suspect my father of being less than honest, which is what worries me most.

Officially we didn't know about the liquidation until the letter appeared today but had heard on the builders' merchant grapevine that something was going on. I have heard stories about assets being sold off cheap in the last 6 months to other family members etc but this is purely hearsay and we have no proof.

He was a director named on the companies house register, but like I say was removed dec 2011, we have paperwork to prove this.

I think the best thing is to be as open and honest as possible but we simply don't know the answer to some of the questions because dh was kept so in the dark. For example, they are asking if there are any connected companies, any guarantees given, and asking when dh received his last financial statement. It is asking how he kept himself aware of the company's financial position and quite frankly, what do you write here - I don't think "my father in law refused to discuss it with me" will wash.

I'm afraid that Poppadom's advice isn't quite right.

Depending on when the company went into liquidation, it's possible that the directors would be asked to contribute to the debts of the company if it was found that the company was trading insolvently. Whether your DH would be caught by this would depend on when he was a director and when the company actually became insolvent (which may be different to when it went into liquidation).

Also, directors (even if they are just a director "in name" can't use the excuse that they had no idea what was going on - its their legal duty to keep themselves informed about the company's affairs and finances. For example, if your DH ever signed the company's accounts, he would be expected to have familiarised himself with them and to be confident they were accurate.

Honesty is the best policy with the liquidator, you are right. If your DH is concerned, he should take advice from a specialist insolvency lawyer - particularly if the letter from the liquidator uses the phrase "wrongful trading" or "insolvent trading".

If you want, I might be able to recommend someone in your area if you PM me.

Sorry if I mislead you, OP. my understanding was that a director could be prosecuted and fined if say, trading insolvently, but could not be approached directly to repay the debt? I thought the veil of incorporation covered this, however I am not a lawyer, so am certainly not going to stamp my feet and demand that I'm right (I have however been a director and was highly sensitive to the trading insolvently issue due to nature of companies, and knew I had a personal liability, I just did not think I could be pursued personally for debts)

I assume comtessed and toughas are lawyers so definitely take their advice ahead of mine.

It's not really that you could be persued personally for the debts (unless if coure you've given a personal guarantee), but that the directors might be asked to contribute to the assets of the insolvent company. It's more than just a fine. The liquidator could (absolute worst case scenario here, OP, it's pretty unlikely to happen to your DH) make the directors bankrupt to claim their assets. That would only happen if, for example, you had a huge mortgage-free house, a speedboat and no kids.

I'm guessing here but I don't get the impression those are your circumstances. They're certainly not mine

Thanks ladies, I guess we will just fill in the form to the best of our ability and hope for the best. Dh's business just about breaks even, I work part time and we have quite a large mortgage. The only bigger things we own outright are the car and van which is essential to dh livelihood. We do have some savings though.

Dh and father also own a small property jointly which is mortgaged and which I have repeatedly asked dh to get out of and due to being on such bad terms with my father it's never happened.

There must be days when dh wishes he has never met me or my father! What a bloody mess!