Flexibility and Forensic Accounting win the Case

Jan 19, 2022

Cavendish IP Solutions recently concluded a claim against a Director of a company in liquidation, where the IP had ascertained that he had withdrawn c£100,000 from the company in the two years preceding the liquidation.

• We invited the Director to a meeting to discuss settlement. He attended with his accountant and claimed that his Director’s Loan Account (DLA) stood at zero i.e., he owed nothing. We responded that this was to a preference which claim was refuted, and the meeting ended without a conclusion.

• As the company had been, unbeknown to us, removed from the Register we agreed with the IP to restore the company to the Register and at the same time we entered into a funding agreement on broadly similar terms.

• During the time taken to restore the company we obtained the electronic accounting records. The DLA was showing a zero balance, however, a close inspection of the records revealed that several transactions, entered into the books shortly before the liquidation, had been backdated. These transactions included a £40,000 dividend entry and the personal sale of equipment by the Director to the company of c£150,000.

• By obtaining a list of those assets we further discovered that the company itself had already acquired the assets from the Director’s previously liquidated company i.e., they could not possibly be owned by the Director.

• We also examined the bought and sales ledgers and found that an associated company had been paid c£150,000 just a few months prior to the liquidation and also found personal accounts belonging to the Director used to disguise funds extracted from the company.

• After the company was restored, we issued claims against the Director for inter alia repayment of his DLA and for orders pursuant to section 847 of the Companies Act 2006 and sections 238 and 239 of the Insolvency Act 1986.

• The claim was settled at mediation for substantially more than the original estimated claim value (i.e., the ~£100,000 debt).

RESULT! Achieved because we rarely give up at the first hurdle and always pursue all avenues.

If you have a claim you would like to discuss with us, please contact us. We would be glad to hear from you.