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Alex J.
Alex J., Litigator
Category: UK Law
Satisfied Customers: 3628
Experience:  LLB, LPC, DELF
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My company sold a converted barn conversion 18mths ago and

Customer Question

My company sold a converted barn conversion 18mths ago and I am concerned that the owner might try and make a claim against my ltd company.The company has only one asset of any value which is an undeveloped barn value circa £100k but the company owes my myself and my wife the only directors £300k do i need to take any actions now
JA: The Lawyer will need to help you with this. Anything else I can tell the Lawyer before I connect you two?
Customer: No
JA: I'm sending you to a secure page on JustAnswer so you can place the $5 fully refundable deposit now. While you're filling out that form, I'll tell the Lawyer about your situation and connect you two.
Submitted: 1 year ago.
Category: UK Law
Expert:  Thomas Judge replied 1 year ago.
Can you provide a little more information please
Customer: replied 1 year ago.
Please could you tell me is the company attractive for the purchaser to make a claim (for alledged defective work) because the company has a £100k asset.Or is it the case that because we the directors have a loan (start up finance) to the company of £300k which has not been repaid the net value of the company is negetive £200k and in which case it is pointless to take any action against the company .Because if a claimant would have priority over the outstanding directors loan then I need to move the asset to another limited company..
Expert:  F E Smith replied 1 year ago.
Do you have any insurance that would cover the alleged defective work?What would be the value of the potential claim?How long have the directors loan has been in place?Do you have evidence of this start-up finance in the form of bank statements and is there any directors loan agreement?
Customer: replied 1 year ago.
I sent a response to your questions why is that not showing and why have I got a message offering me $10 off my next question? i want a full refund
Expert:  F E Smith replied 1 year ago.
I cannot see a response to my previous request for information and hence, I am unable to take this further. Unfortunately, I cannot deal with a refund for you but Customer Services will arrange it for you if you contact them.Best wishesFES
Expert:  Ben Jones replied 1 year ago.
edit - please ignore
Customer: replied 1 year ago.
I sent a response last week which you dont appear to have received so here are the responses:My question is does the repayment of the director loan take precedent over any creditors claim and in order to protect the company asset and the companies ability to repay the directors loan do i need to take action now or will a lawyer or an accountant look at the accounts any say that the company has no net worth???
My response to your questions is as follows:1) No insurance cover. I doubt any insurance would cover a fault in workmanship if that was the cause. Regarding product liability this would be a separate cover whichthe company does not have and in this case product failure is not relavent to most of alledged defects.
2)Claim value no idea if could be £40k of which i might have a £10 to 15K liability. But I dont want the hassle of a legal claim and if i have to wind the company up and move the asset to another ltd company then lets do it now is my attitude.
3) We raised the £300k via a interest only loan from the bank (now Santander) to myself and my wife in our personal capacity the money was sent direct by Abbey now Santander to our solicitor and all of the money was used to purchase the development site in 2004 (this loan is secured against our house). and we have statements indicating such for each yearThe loan has been since the start of the business in 2004 and was used to purchase the development site (for 3 No dwelings) and the purchase was registered in the company name which is registered at land registry in the company name. This potential dispute arises out of the sale of the last of the three units.
The company records show that the company paid the interest on the loan and this has been included in the company accounts as a business expense. Further the directors tax returns indicate a claim for tax relief on the interest on this loan.I am not sure if there a formal loan agreement in place I would need to dig out old records. The company bank statements and accounts also also show that the directors made further loans as working capital of £57k to period ending 2013 which to date has not been re paid nor is it likely to be repaid the company at present will only be able to repay £150k of the loan upon the sale of there only asset.
I trust this is sufficient informationRegards ***** *****
Expert:  Alex J. replied 1 year ago.
Hi, Thank you for your question and welcome. My name is ***** ***** I will assist you. To answer your question, unless a director loan is secured (by a debenture or charge) it will take no preference in repayment over any other creditor - and is simply treated as an unsecured creditor. In fact if the director loan is repaid before the company goes insolvent, and the company clearly was going to go insolvent when the repayment this is known as a "Preference" - S.239 of the Insolvency Act 1986. If it is deemed to be a preference the director can be ordered to repay the money. If the directors believe the company is insolvent, then they would have to stave off liquidation for two years from the date of the pay to avoid any suggestion of a preference. Can I assist you any further? Kind regards AJ