Overdrawn Directors Loan Accounts & Preferences in an Insolvency Company XYZ

At Navigate Business Recovery, we were instructed to advise a company selling software to Accountants.

The assets compromised of the Sales Ledger Balance to collect money due from a few contractors where the Director of XYZ had provided advice and training on the software.

We worked very hard to recover the money from the contractors and after some mediation we recovered almost 78% of the sums due. In the business review process, we discovered large sums of money being paid to connected parties of the Directors of the Company in the period prior to the liquidation. A total of £75,000 was paid to one of the Director’s sister to repay loans made when the business had been set up two years prior to failure. Also, a small amount to a friend of the Director, who had helped pay the wages for four weeks when cashflow was an issue.

In both cases, the Director provided a detailed explanation in relation to the reasons why these payments were made. There was supporting documents in relation to the £75,000 paid to the sister and the Director’s friend. We assisted the Director to prepare a chronological narrative statement and prepare a bundle of documents to show the Insolvency Practitioner who had made a claim under Section 239 of the Insolvency Act 1986.

After protracted negotiation, a sum of £25,000 was agreed to be paid back into the Liquidation.

It is always best to talk to an Insolvency Practitioner as soon as your company shows the first signs of running into difficulty, we will give you honest and straight advice and make sure that you are aware of your obligations.  We will advise you throughout a formal insolvency process step by step and ensure that you don’t break any rules.

Next Step

If you want to find out anything further about this topic then please feel free to call on 0330 236 9930, 0330 236 9938 or 07961 116321. All conversations will be in strict confidence. You can also email vee@navigatebr.com

This article is for information and interest only. It is not a substitute for full professional advice, which will take in to account the specific and individual circumstances. Navigate Business Recovery Limited cannot accept any responsibility for any loss arising as a result of any person or organisation acting or refraining from acting on any information.