Advice for a friend

[razza]

Hi I have a friend who ran a ltd company ever since we left university and due to the economic climate he is in the process of closing the ltd company down. Now he is a sensitive type and he is fretting because he received a letter from a solicitors firm regarding the business merchant account. He owes £613 to the bank. He has signed no personal guarantees or took out any loans, credit cards etc. I have told him that he is okay and that the bank won't touch his assets (he hasn't any) and because its a ltd company and also it is very unlikely the solicitors will take him to court. The letter is addressed as follows:

The Director
Company Name Ltd
Etc

Dear Sirs,

... We may commence legal action if you do not pay within 14 days ...

have I given him the right advice?

thanks!

[FlamingParrot]

Re: Advice for a friend

Hi I have a friend who ran a ltd company ever since we left university and due to the economic climate he is in the process of closing the ltd company down. Now he is a sensitive type and he is fretting because he received a letter from a solicitors firm regarding the business merchant account. He owes £613 to the bank. He has signed no personal guarantees or took out any loans, credit cards etc. I have told him that he is okay and that the bank won't touch his assets (he hasn't any) and because its a ltd company and also it is very unlikely the solicitors will take him to court.

If the account was in the company's name and there were no personal guarantees, I'd say he wouldn't be liable for this debt because a LIMITED company is a separate legal entity from its directors and shareholders, the whole point being precisely that there is LIMITED liability for any debts. You may want share this link with your friend: http://www.bdl.org.uk/images/10_EW_B...0Companies.pdf

In particular the following paragraph may be relevant:

If you are applying for credit, or signing an agreement for your limited company, make sure that the creditor knows that you are signing for, and on behalf of, the limited company. You may need to have the agreement checked by a solicitor to ensure that you are not signing in your own name. If you do not make this clear, you may be at risk of the creditor trying to pursue you personally for any missed or late payments. Also, some creditors may claim that they were unaware that they were dealing with a limited company. If this has happened to you, phone us for advice.