SUDDEN DEATH of my partner - Stuck in limited company with 2nd property - HELP!

silvercar

MobileSaver said:

buildingbee said:

Where on the forum is the best place to post on understanding how to wind-up a company?  Also as you know my circumstances which is once I've sold the property, I will be paying myself any director loans that were originally paid to the company and since I don't owe any debt to anyone else and shouldn't have any tax to pay (I assume I'm right on this one as I've not earned any income as such) which option would I chose when winding-up? Members’ Voluntary Liquidation (MVL), Creditors’ Voluntary Liquidation, Compulsory Liquidation?

Just update this thread when the time comes (which will be months away in the future) as that will give context for everyone.

Assuming the company has no outstanding debts then it will be MVL.

Given the circumstances my advice would be to do whatever it takes (if you can) to ensure the company is solvent so that you can close it down quickly and cleanly and draw a line under the matter. If that means you personally paying some or all of the EA or solicitor fees so that they don't appear in the company accounts or writing off part of your director's loan to the company then so be it; the goal would be for the company to be solvent after selling the property so you can close the company with no possible repercussions.

I agree IF the right course of action is to sell up. It may be that it could provide a steady income stream that would do more than cover the mortgage, in which case it would be beneficial to keep the property. An accountant could advise.  

MobileSaver

silvercar said:

MobileSaver said:

buildingbee said:

Where on the forum is the best place to post on understanding how to wind-up a company?  Also as you know my circumstances which is once I've sold the property, I will be paying myself any director loans that were originally paid to the company and since I don't owe any debt to anyone else and shouldn't have any tax to pay (I assume I'm right on this one as I've not earned any income as such) which option would I chose when winding-up? Members’ Voluntary Liquidation (MVL), Creditors’ Voluntary Liquidation, Compulsory Liquidation?

Just update this thread when the time comes (which will be months away in the future) as that will give context for everyone.

Assuming the company has no outstanding debts then it will be MVL.

Given the circumstances my advice would be to do whatever it takes (if you can) to ensure the company is solvent so that you can close it down quickly and cleanly and draw a line under the matter. If that means you personally paying some or all of the EA or solicitor fees so that they don't appear in the company accounts or writing off part of your director's loan to the company then so be it; the goal would be for the company to be solvent after selling the property so you can close the company with no possible repercussions.

I agree IF the right course of action is to sell up.

That's a fair point but, based on the OP's earlier comments, becoming a landlord doesn't seem a wise move to me;  they never really wanted to do this in the first place, they were happy having a mortgage-free home, the way it's been set up means they have additional onerous statutory obligations and crucially their finances are currently in dire straights which could spell disaster if a tenant stops paying rent or essential repairs need doing to the tenanted property.

I agree that in the long term the rental could prove to be the better financial choice but at the same time it means the OP has more ongoing work to do both in managing the rental and managing the limited company and there are real financial risks involved while the OP has no safety net.

It doesn't sound prudent to me but obviously only the OP can decide whether to sell or rent is best for them.

buildingbee

Mobilesaver, thanks for clarifying that the property is owned by the company and that I can continue to sell the property as the director.  The only thing I can say is that when he setup the company, he had the main control, hence 55% shares and I had 45% shares, so not sure if this makes any difference.  My next job is to let Companies House know that he has deceased.  Forgive me, but regarding the word "Solvent" - How do you define solvent?  If I sold the property, paid off any solicitor/EA fees due and then what is left over is the remaining director's loan and I then withdraw it all, is that then solvent company?

Silvercar, I agree with Mobilesaver as I did have a think about all the helpful feedback/comments made on this forum about becoming a landlady, but I decided to move on and bring a close to this chapter.

Annisele

Very, very broadly, "solvent" means that the company can meet its liabilities as they fall due. In practice it's extremely difficult for a company that only owes money to its directors to become insolvent without the directors actively choosing to make it so.

If you're the only director, then (subject to there not being anything weird in the company's memorandum and articles) then you can sell the property on the company's behalf. But it would usually be prudent to consult major shareholders before you did that sort of thing.

I think you said your husband left a will - do you know who inherits his 55% of the company? If it's you, then in practice there's no problem; you're not going to wear your shareholder hat in order to object to the actions you took wearing your director hat. But if it's somebody else it's possible that somebody else could make life difficult for you. (Usually not, especially if the shares are an unexpected inheritance, but sometimes people are strange.)

buildingbee

Annisele said:

Very, very broadly, "solvent" means that the company can meet its liabilities as they fall due. In practice it's extremely difficult for a company that only owes money to its directors to become insolvent without the directors actively choosing to make it so.

If you're the only director, then (subject to there not being anything weird in the company's memorandum and articles) then you can sell the property on the company's behalf. But it would usually be prudent to consult major shareholders before you did that sort of thing.

I think you said your husband left a will - do you know who inherits his 55% of the company? If it's you, then in practice there's no problem; you're not going to wear your shareholder hat in order to object to the actions you took wearing your director hat. But if it's somebody else it's possible that somebody else could make life difficult for you. (Usually not, especially if the shares are an unexpected inheritance, but sometimes people are strange.)

Bless his kind soul as he has left everything to me.  There's obviously no other shareholders, nor could I find anything in the memorandum or articles, so I guess I should be safe to go ahead and sell it.

I'll tell you the reason for my question about solvency, but I'll have to give you a hypothetical example, if I could:-
1. Let's say including both the remortgage and directors loan, my total is £210k (mortgage = £200k, dir loan = £10k)
2. I now sell the property for £200k
3. From the £205k, I pay off all the solicitors and estate agent fees and also the mortgage.
4. I'm then left with £5k

Am I okay to withdraw the remaining £5k because it's what's left of the directors loan or would this cause any problems?

km1500

Yes you can withdraw the money as repayment for the director's loan.

Annisele

buildingbee said:

I'll tell you the reason for my question about solvency, but I'll have to give you a hypothetical example, if I could:-
1. Let's say including both the remortgage and directors loan, my total is £210k (mortgage = £200k, dir loan = £10k)
2. I now sell the property for £200k
3. From the £205k, I pay off all the solicitors and estate agent fees and also the mortgage.
4. I'm then left with £5k

Am I okay to withdraw the remaining £5k because it's what's left of the directors loan or would this cause any problems?

Possibly, but I'm not following your figures there - where did £205k come from?

I may well have misunderstood, but I thought you said upthread that the mortgage was on your residential home, and that that was held in your and your late husband's personal names? If so I'd expect the director's loan to be quite a lot more than £10k.

MobileSaver

buildingbee said:

The only thing I can say is that when he setup the company, he had the main control, hence 55% shares and I had 45% shares, so not sure if this makes any difference. 

No, the different shareholdings make no difference. They don't affect the running of the SPV and would only have an effect when/if it came to distributing any profits (which from what you've said sounds unlikely anyway) and even then as you are the beneficiary of your late husband's estate the practical difference would be nil.

buildingbee said:

My next job is to let Companies House know that he has deceased. 

As mentioned previously, most statutory paperwork isn't difficult to do but the key is to make sure you don't miss any statutory deadlines (such as the 14 day limit on notifying Companies House of the death of a director) as otherwise I would expect a £150 penalty to be issued automatically.

It is not the end of the world if you do slightly miss the deadline as under the circumstances I am confident we can help you successfully appeal the penalty but obviously it's better to avoid it in the first place if at all possible.

buildingbee said:

Forgive me, but regarding the word "Solvent" - How do you define solvent?  If I sold the property, paid off any solicitor/EA fees due and then what is left over is the remaining director's loan and I then withdraw it all, is that then solvent company?

Solvent means your (company's) entire assets are more than your entire debts and it is important to note that this is not the same as whether your bank balance is positive or negative. So you could be overdrawn but still be solvent or you could have 1p left in the bank but still be insolvent.

What matters for solvency is your accounts not your bank balance; if you pay all the fees and withdraw everything else from the bank but there's not enough to cover the full amount of the director's loan then technically you are insolvent as the debts are more than the assets.

However as the only debts in this case are the director's loan and you are the director then you can just write off the shortfall in the accounts, submit your final accounts showing no outstanding debts and then strike-off the company.

MobileSaver

Annisele said:

buildingbee said:

I'll tell you the reason for my question about solvency, but I'll have to give you a hypothetical example, if I could:-
1. Let's say including both the remortgage and directors loan, my total is £210k (mortgage = £200k, dir loan = £10k)
2. I now sell the property for £200k
3. From the £205k, I pay off all the solicitors and estate agent fees and also the mortgage.
4. I'm then left with £5k

Am I okay to withdraw the remaining £5k because it's what's left of the directors loan or would this cause any problems?

Possibly, but I'm not following your figures there - where did £205k come from?

I may well have misunderstood, but I thought you said upthread that the mortgage was on your residential home, and that that was held in your and your late husband's personal names? If so I'd expect the director's loan to be quite a lot more than £10k.

As @Annisele says, something doesn't quite add up here.

How did the company buy a £200k property if you and your late husband only lent the company £10k as per the director's loan? If the £200k remortgage was in your personal names and you lent that £200k to the company as well as £10k cash then the director's loan should be £200k+£10k=£210k. Or was the "remortgage" taken out in the company's name?

Regardless, if the company has debts of £210k (mortgage = £200k, dir loan = £10k) and you sell the property for £200k then you have a problem and are insolvent as there's not enough to pay all of the solicitors, estate agents, mortgage and director's loan. If the shortfall is less than the director's loan then you can make the company solvent by writing off some or all of the director's loan.

In your hypothetical example, did you already have something like £8k in the bank, solicitor and EA fees of £3k to be paid so that when the £200k property proceeds arrived that would leave you with £205k? If so then yes you can withdraw the remaining £5k to repay part of the director's loan and then you'd write off the remaining director's loan to make the company solvent and then strike-off the company.