October 29th, 2012 / Insight posted in

Creditor stops us winding up firm

EF writes: I am looking to reduce the number of companies in our group. Two have been long dormant, but a solicitor has raised an issue with one of them. The company ceased trading three years ago and, in the final year of trading, received an invoice from a consultant for £13,222. We disputed the amount, as the company had never received the services, and heard nothing for a while. The last correspondence we had about the debt was from a debt collection agency in 2009. We explained the reasons why the invoice had not been paid, and would not be paid.

Our solicitors are aware of the potential creditor position and are concerned that if we strike the company off, as directors, we may be making a false declaration. How can we resolve the position with the company and strike it off?

A disputed claim is a real problem when striking off a company, as the directors are committing an offence by making a striking-off application when they have existing or contingent liabilities, writes Ian Robert, insolvency partner at Kingston Smith LLP. The claim described is a contingent liability, so the creditor must withdraw the claim before you can use Companies House form DS01 to strike off the company.

An alternative is to put the company into solvent (voluntary) liquidation, with another group member indemnifying the company for any valid claims that arise upon liquidation. The liquidator is obligated to adjudicate on the creditor’s claim and, as part of this process, would write to the disputed creditor asking for evidence to support the claim, i.e. that the services were provided.

Should the evidence to support the claim not materialise the liquidator has the ability to reject any claims that cannot be proven. The claimant then has 21 days to go to court or give up the claim. The voluntary liquidation puts an increased cost on the company, but has the benefit of putting the onus on the creditor and protects the director’s position in the event of spurious claims.