Need help to issue proceedings

[steveeasy]

Hi,
I am a partner and shareholder in a small LTD company. the majority shareholder has cancelled bank account, gone to customers and let them of the VAT so they pay him in to his personal account. he then has denied ever receiving the money. the customers confirmed they have paid him excluding VAT.
Ive spoken to insolvency practitioners and they say its simply Fraud. He just wont acknowledge he has had the money. he has emailed my saying I am sacked. stopped me selling any stock. Ive tried to reason with him so we can pay creditors but just get continual abuse.


I wish to pursue him for the perceived fraud of funds. I am happy to go alone, but do I just use the N1 form and set out my claim even when its fraud.

Id appreciate any guidance.


thanks
steveeasy

[R0b]

Re: Need help to issue proceedings

- It does sound a bit like fraud, have you gathered much evidence so far e.g. written statements from customers?
- When you say partner, do you mean a director of the company?
- Does the company have any special or amended articles or does it just use the model articles?

If you are a director, he can't just tell you that you are "sacked" there is a process for doing so, but again depends on the articles of the company.

Fraud is a criminal offence but the equivalent of civil fraud is fraudulent misrepresentation and tort of deceit. If he is also a director then he will likely be in breach of his director duties of one or more of the following:
- not accepting benefits from third parties
- conflict of interest
- declaring any interests in a proposed transaction
- promoting the success of the company

If the company also goes into liquidation as a result then he could also be liable as a director under the Insolvency Act for wrongful trading and may have be accountable for any actions done leading up to the insolvency or even fraudulent trading. You also need to protect yourself too in the event the Ltd Company does go into liquidation and obtaining/seeking advice is of course the best defence to offset you having any liability.

How much is the funds that is taken? The most important thing to bear in mind is that the Claimant will be the Ltd Company and not yourself, but you can bring it on behalf of the company as a shareholder.

The N1 form will be the one to use but I would suggest in a case like this to attach a Particulars of Claim, you won't have enough space to put everything into the small box.

[steveeasy]

Re: Need help to issue proceedings

- It does sound a bit like fraud, have you gathered much evidence so far e.g. written statements from customers?
- When you say partner, do you mean a director of the company?
- Does the company have any special or amended articles or does it just use the model articles?

If you are a director, he can't just tell you that you are "sacked" there is a process for doing so, but again depends on the articles of the company.

Fraud is a criminal offence but the equivalent of civil fraud is fraudulent misrepresentation and tort of deceit. If he is also a director then he will likely be in breach of his director duties of one or more of the following:
- not accepting benefits from third parties
- conflict of interest
- declaring any interests in a proposed transaction
- promoting the success of the company

If the company also goes into liquidation as a result then he could also be liable as a director under the Insolvency Act for wrongful trading and may have be accountable for any actions done leading up to the insolvency or even fraudulent trading. You also need to protect yourself too in the event the Ltd Company does go into liquidation and obtaining/seeking advice is of course the best defence to offset you having any liability.

How much is the funds that is taken? The most important thing to bear in mind is that the Claimant will be the Ltd Company and not yourself, but you can bring it on behalf of the company as a shareholder.

The N1 form will be the one to use but I would suggest in a case like this to attach a Particulars of Claim, you won't have enough space to put everything into the small box.

hI ,
THANK YOU FOR YOUR VERY HELPFUL RESPONSE.
yes I do mean director of a company. unfortunately we have no articles of association. we had a written agreement were I would pay 500 per month for 7 years to buy 50% of company assets. he was a friend and needed help and wanted me to work with him. so we set up a new company, worked for 4 months, then he told me he was getting a bum deal, the company had no assets and the agreement was worthless. just as id paid for a joint bank account.

he phoned the bank, cancelled the account. money was returned to customers. he then went to them saying forget the VAT and pay him in to his personal account. he told me he was doing this. then he denied they had paid him. yes the customers have provided written proof he has been paid.

we now have no funds to pay creditors. he will not agree to open an account to bank payments for the ltd company. he will not even agree to pay loans to the company, the rent, or anything else. Ive told him if he does not make funds available Ill sell company assets to only pay creditors. I am not claiming a single penny of wages, drawings or expenses. just ensuring the company pays its liabilities.

very good point thanks. so the company sue the director. I understand completely

thanks

steveeasy
.

[R0b]

Re: Need help to issue proceedings

The Ltd Company is a separate legal entity and the funds are not yours but the Company's so that is why you sue in the company name. Before you decide to take them to court and considering the company has no funds, you may wish to look at other options.

1. You can make an application to the court to remove him as a director given his conduct (fraud would be strong evidence to remove). If the court grants it, then he will not be able to act for the company anymore.

2. Depending on the advice taken already, seek further advice from an insolvency practitioner and consider whether or not the bets thing to do is to put the company into liquidation. Someone will be appointed and given the circumstances will want to recover the money from the director. It's probably likely that if found guilty, he will be disqualified as being a director of a company for X years. This will give you a further defence of seeking professional advice and acting on it which means you are unlikely to be caught in the cross fire and have any form of liability. There of course 2 ways to wind up a company, by the members themselves or by the creditors by petition to the court. subject to your % of shares in the business as a shareholder you could do this or if not you may inform the creditors what has happened and they could petition to wind up the business. Again, it is important to seek professional advice I think on what actions to take and how to ensure you have no liability.

3. You could make an application to court to recover the funds but as a director you also need to look at your own duties as a director and whether or not court action against the offending director is the best way forward if there is no funds to pay the creditor - perhaps that option may be best left to the insolvency practitioner.

Its obviously difficult when something like this happens which is always why you should seek advice before you do anything as if you take the wrong steps and the court agrees, then you will also become liable to pay.

[steveeasy]

Re: Need help to issue proceedings

The Ltd Company is a separate legal entity and the funds are not yours but the Company's so that is why you sue in the company name. Before you decide to take them to court and considering the company has no funds, you may wish to look at other options.

1. You can make an application to the court to remove him as a director given his conduct (fraud would be strong evidence to remove). If the court grants it, then he will not be able to act for the company anymore.

2. Depending on the advice taken already, seek further advice from an insolvency practitioner and consider whether or not the bets thing to do is to put the company into liquidation. Someone will be appointed and given the circumstances will want to recover the money from the director. It's probably likely that if found guilty, he will be disqualified as being a director of a company for X years. This will give you a further defence of seeking professional advice and acting on it which means you are unlikely to be caught in the cross fire and have any form of liability. There of course 2 ways to wind up a company, by the members themselves or by the creditors by petition to the court. subject to your % of shares in the business as a shareholder you could do this or if not you may inform the creditors what has happened and they could petition to wind up the business. Again, it is important to seek professional advice I think on what actions to take and how to ensure you have no liability.

3. You could make an application to court to recover the funds but as a director you also need to look at your own duties as a director and whether or not court action against the offending director is the best way forward if there is no funds to pay the creditor - perhaps that option may be best left to the insolvency practitioner.

Its obviously difficult when something like this happens which is always why you should seek advice before you do anything as if you take the wrong steps and the court agrees, then you will also become liable to pay.

Hi,
I have tried to reason with the director just to pay the creditors. he wont let us set a new account up(he closed the last one. we have some money but no account to pay it in to. I therefore want to sell stock to pay creditors, Ive been told Ill be stealing if I do. I am considering selling some small assets simply to settle creditors.

He seams to have become deluded, offering me £180 and telling me to pay the liabilities. he has absolutely no intention in acting in a responsible manner.

So I think Ill have to go to the court, ill be sueing for the Fraud in takeing payment minus VAT and then informing the company he has not received any payments. But How to I apply to the court to remove him if proved he is acting very poorly. Ive written to companies house as they told me too, only to be told to write to insolvency service.

thanks

steveeasy

[R0b]

Re: Need help to issue proceedings

claims by a shareholder are called a derivative claim. In this case the director is in breach of his duties and has made a personal gain from the company. asi have pointed out the claim must be brought under the name of the company and not you personally.

In terms of redress you could seek an injunction against the director to stop him from carrying in the breaches, the court also has the power terminate the directors service contract and an order to pay back the monies.

Derivative claims are set out somewhere in the Companies Act 2006, not sure off the top of my head what provisions you would be relying on but they will be in there somewhere.

[steveeasy]

Re: Need help to issue proceedings

claims by a shareholder are called a derivative claim. In this case the director is in breach of his duties and has made a personal gain from the company. asi have pointed out the claim must be brought under the name of the company and not you personally.

In terms of redress you could seek an injunction against the director to stop him from carrying in the breaches, the court also has the power terminate the directors service contract and an order to pay back the monies.

Derivative claims are set out somewhere in the Companies Act 2006, not sure off the top of my head what provisions you would be relying on but they will be in there somewhere.

firstly, thanks for the advice from everyone, much appreciated. The director has also stated all the time im part of the company no money will ever be paid in to the company, so the partnership is at rock bottom. ive suggested a mediator several times and indeed if he wants to meet with someone he is comfortable with, all fallen on deaf ears. thankfully all this has been on emails, so plenty of evidence.

I too however have perhaps inflamed the situation but have had to protect my ability to repay creditors by removing machinary/assets, and have given him 7 days to either agree to set up a bank account and return the money and jointly agree who to pay. or ill sell them and pay only creditors and then return any balance to the company. even that's fallen on deaf ears. their is a very distinct difference between myself and the other director, im claiming not a single penny just want to pay the people the company owes. he wants to pay no one, and as I said offered me 30 hours at £6.70 for 5 months work oh and I can pay the rent we owe from that.

thank you

steveeasy

[steveeasy]

Re: Need help to issue proceedings

Hi,
sorry for asking for more information. I have the invoices. I have statements by the other director telling me he has asked the customers to pay him net of VAT. I have a statement by the customer telling me they have paid him. I then have email from the other director informing me he has not received any payments. I also then have a long trail of emails where he sets out not to pay anyone. will not open a new bank account. will never pay money in to the business while im a director. so ive think ive plenty of evidence.

So do I just set out the facts on the N1 form or do I have to refer to derivative claims and try and make out I know what im doing when I don't. as usual I cant fund a solicitor, so have to go it alone. all I want is a judge to order the director to make the funds available to pay the creditors.

thanks


steveeasy

[R0b]

Re: Need help to issue proceedings

Well ideally you should seek expert advice on this as it can be a bit complex, do you know if he is likely to defend this himself or instruct a solicitor?

I doubt you could fit all of the facts on the N1 form as you would want to be fairly detailed as to what he has done and the remedies you are seeking. I would suggest you should set out the Particulars of Claim separately and attach it with the Claim form with brief details in the box.

The claim will be made under Chapter 1 of Part 11 of the Companies Act 2006 insofar as the director has been, negligent, breached his director duties and/or potentially breach of trust.

You should set out the facts and describe the events of what has happened, you would in addition need to explain what he has specifically breached. You will also need to know whether you have adopted the model articles or have special/amended ones. All this documentation should be held at the registered office and as a shareholder you are entitled to view this. The Form you will specifically be looking at will be Form IN01 which says whether or not the company agrees to adopt the model articles (box A7). The articles will also determine how you proceed with the claim and what to put into your particulars of claim. Alternatively you could go to https://beta.companieshouse.gov.uk/ and put in your company name and then under "Filing History" you should if you can see "Incorporation" document in a PDF format it may tell you there.

I could assist on this but the earliest is going to be this weekend. I would however see if you can get any free consultation or advice in the meantime if possible - or even an introductory price for an hours bit of advice and at least you will understand and know what way to go along with your options on what to do. See this one for example http://www.qualitysolicitors.com/med...e-first-advice or I believe there is a comparison site LB has created which may also be of use and assistance [MENTION=49370]Kati[/MENTION], [MENTION=6]Amethyst[/MENTION] may be able to offer help there

[Kati]

Re: Need help to issue proceedings

I believe there is a comparison site LB has created which may also be of use and assistance @Kati, @Amethyst may be able to offer help there

LB Compare [MENTION=71570]R0b[/MENTION]??

http://lbcompare.co.uk

[R0b]

Re: Need help to issue proceedings

that's the one thanks

[steveeasy]

Re: Need help to issue proceedings

Hi,
thank you for the response. he will defend his actions, but only on by himself. its a relatively small amount of money. the company has income of £1900. 600 he has stolen and 1300 is being held by the customer on my instructions only to pay the ltd company(they were to pay him but I requested they only pay to the LTD company. he had arranged to knock off the VAT and pay him in to his personal account. we have creditors owed £2000.


As stated the other director does not want to set up a account to handle the money. he closed the last one. he will not agree to any mediation. he will not agree to sell stock or assets. he has told me to pay the rent and offered me 30X6.70 per hour.


To clarify I am not seeking a single penny. I just want the liabilities paid. he wants the money. he is 67 years old a Dr and acting like a child, whilst I appreciate he may have claims towards myself. why he would stop paying people is unbelievable. he has contacted suppliers and told them not to deal with me. I am trying to sell excess stock to raise money to clear liabilities. I hold assets but don't want to sell them as it will not raise the actual value of machines. I am planning to resign as soon as the debts are cleared up.

steveeasy

[steveeasy]

Re: Need help to issue proceedings

Hi,
The other director has admitted being paid and has acknowledged he has not used the funds to pay any creditors. the correspondence ended from the other director telling me to pay the rent myself, hell pay his bit, It ended being called a four letter word again.

I explained to him, the funds are not his or mine but the companies. Ive also explained the creditors are not mine or his but the companies. he said do what you like. hell let the company die.

So I am going to request a judge considers the actions of the director is a breach of trust. fraud by using company money for his own personal benefit, and refusing sell stock or assets to pay creditors. I will ask the judge to disqualify the director and repay the funds, this will allow me to set an account up, and then clear all the creditors. then I will dissolve the company.

Any idea of the court fee for this. it clearly is not a money claim.


thanks

steveeasy

[des8]

Re: Need help to issue proceedings

I know that R0b has suggested proceeding under the Companies act 2006, and so it is with some trepidation I jump in and suggest you might consider initiating proceedings under Company Directors Disqualification Act 1986 (cf sec 16).

Also you may find pointers here ( https://www.justice.gov.uk/courts/pr...roceedings#1.1) & (http://www.justice.gov.uk/courts/pro...-direction.pdf) as to how to proceed.

I think all applications to disqualify a director are allocated to the multi track and the fee is £1000., the hearing fee being another £1000 +(but would be good to have others input)

[R0b]

Re: Need help to issue proceedings

Any action brought under a derivative claim is a two stage process, first you make the application for permission. The court decides whether to grant permission and then there will be a hearing to determine the application.

You must submit a particulars of claim along with the application. As for the court and fees for this I am not quite sure as to the correct court and fees I would need to look into it, I could be wrong but I don't think you could issue in the small claims it would need to be the high court at least.

[MENTION=39710]des8[/MENTION], not sure if the link you've posted is the correct one that could be under insolvency rules and when a liquidator makes an application for disqualification - would need to read it fully though.

Either way, it's not cheap. i was thinking earlier though, why don't you just resign, sell of your shares and seek advice as I suggested. That way you are not wasting court money it is then down to him to pay the creditors and you have a defence of avoiding liability by seeking professional advice on your options.

If you are so desparate to bring a claim I'll look into it fully over the weekend but it's not a simple process