Question Is: £10k Left In The Bank So Who Gets It?
The question in the article is that there is £10k left in the company bank and it has no other assets, so who gets it on Liquidation?
Can a Director take it if they are owed money such as from arrears of wages or monies due on a Director Loan Account just prior to going into Liquidation?
The answer to the question is no. But why?
Preference Payment
A Director is connected to a company and as a result, the payment of arrears of wages or repayment of the Director’s loan account could amount to a Preference if the company has creditors other than the Director.
If there is £10k left in the bank, then that money is usually going to be the source of funds to pay the costs and expenses of putting the company into Liquidation (pre-appointment phase) and the Liquidator‘s fees as well i.e. the post-appointment phase
Expenses Of The Liquidation
It would seem unlikely that a Director could be certain that the combination of the pre-appointment and the post-appointment fees ie. the reasonable fees of the Insolvency Practitioner would not be less than the £10k left in the bank account.
Such expenses of the Liquidation rank ahead of the unsecured creditors in the statutory order of payment in insolvency proceedings. The regulatory, investigatory and compliance requirements are extensive and time consuming. It is therefore quite likely that the Insolvency Practitioner’s fees will stretch to and could even exceed the £10k left in the bank.
When a company is insolvent and particularly when Liquidation is largely inevitable, the statutory order of payment that would arise on a Liquidation should be adhered to. As a Director may not be readily familiar with such rules they should attempt to act in accordance with their Director duties by in particular avoidance of making Preference payments.
Leaving The £10k In The Bank To The Insolvency Practitioner
It is likely to be a good idea to leave the matter of the £10k left in the bank to the Insolvency Practitioner to deal with.
The reason is assuming the company is insolvent then deployment of the asset (the leftover bank monies) needs to be done carefully. So if a Director left it to the Insolvency Practitioner and the money was deployed incorrectly (hopefully not as that is what Insolvency Practitioners know how to do) then it is unlikely the £10k left in the bank would be an issue for the Director to later be concerned about.
On the other hand, if a Director decided to deal with it directly, they might make a payment from the available funds that was not strictly in accordance with their Director’s duties and could, later on, be unwound. It might also be a matter that a Liquidator had to refer in his or her report/questionnaire that is always completed on the conduct of Directors to the Insolvency Service’s Director Conduct Reporting Service.
