As a result of the recession and general economic climate, one of the directors of a specialist electrical and mechanical contracting company decided to leave the business and set up independently. In addition to taking a number of clients with him, this particular director also left the business with an overdrawn directors loan account in excess of £59,000. This departure compounded the financial difficulties of the business and attempts made by the remaining directors to recover the funds due to the company were not successful. This led to a decision to liquidate.
The Solution - how we helped
Following our appointment as liquidator, the first priority was to pursue recovery of the money owed to the insolvent company by the ex-director. In the first instance, we sort to negotiate and agree repayment of the overdrawn directors loan. When this settlement was refused, we issued proceedings against the director for repayment in full.
Thorough investigation of a company’s financial records is always important in providing an effective case. A painstaking interrogation of the company’s books allowed us to identify and verify the amounts withdrawn and build an accurate picture of what was owed back to the company.
When the ex-director approached the court with spurious counterclaims and assertions against the business for supposed expenses, we were able to easily disprove these claims by showing that the accounts had been signed off by the ex-director himself.
This resulted in an agreement being reached at the eleventh hour on the steps of the court. The director not only had to pay the full debt that was due but also substantial costs.
The successful recovery of funds resulted in a significantly improved return for creditors - a dividend of over 30 pence in the pound after costs.
This case highlights the importance of good director conduct, particularly with regard to the correct use of directors loans.