Limited Company advice required - after bankruptcy

[lucylucy]

I became bankrupt in June and I am currently working full time in a permanent position. I have agreed an IPA (Individual personal agreement - which means I pay anything above my £1200 pcm allowance to the Official Receiver (OR)) with the OR for three years. I have the opportunity to become a contractor but would need to setup a limited company to do this. Obviously as a bankrupt I cannot be the director so my partner is happy to take this role. The question is can my partner take dividends or a salary out of the company and I be paid a minimum wage so that we can maximise what I earn rather than have all the income above my allowance going to the Official Reciever?

Regard

Lucy

[northernladuk]

I became bankrupt in June and I am currently working full time in a permanent position. I have agreed an IPA (Individual personal agreement - which means I pay anything above my £1200 pcm allowance to the Official Receiver (OR)) with the OR for three years. I have the opportunity to become a contractor but would need to setup a limited company to do this. Obviously as a bankrupt I cannot be the director so my partner is happy to take this role. The question is can my partner take dividends or a salary out of the company and I be paid a minimum wage so that we can maximise what I earn rather than have all the income above my allowance going to the Official Reciever?

Regard

Lucy

You mean avoid your responsibilities? I think you can work that one out.

You can only pay your partner what he is due for work done in the company. You cannot just pay him instead of you. Bit of common sense would help here. You can allocate him a lesser share say 70/30 split but he isn't the main earner so why would he be able to take all the money?

This line of thinking is going to get you in even more trouble than you are now.

Your best bet would be to speak to an accountant to maximise what you can give your husband but you are not going to get away scott free. Not sure how you are going to open a business account though.

Whatever you do make sure it is water tight and not pushing the boundries. You are neck deep and have to take your responsibilities seriously, not further add to your woes by having HMRC take you to the cleaners as well.

[Clare@InTouch]

If you're bankrupt then you're banned from being a director, and that includes being a shadow director which is what I think you're proposing.

From Companies House:

If you have been made bankrupt and your bankruptcy is still in force, you cannot act as a director of a company or member of an LLP.

FAQs - Disqualified Directors Register


While disqualified, you must not:

• be a director of any company
• act like a director - even without being formally appointed
• influence the running of a company through the directors
• be involved in the formation of a new company
• act in a way that promotes a company

Ignoring a disqualification order is a criminal offence. You could be fined and sent to prison for up to two years.

Disqualification of directors | Business Link

[Steven@Parasol]

Working via an umbrella company could be an alternative option for you if you have been declared bankrupt.

The financial advantages are probably less then contrcting via your own limited company but the umbrella will remove a lot of the hassle and can protect both yourself and the hirer as the liability sits with the umbrella company.

[d000hg]

• act in a way that promotes a company

How is 'promote' defined here? Presumably you could take a job in a marketing role or something?

[craig1]

You can ask a judge to give you permission to be a director while bankrupt in specific circumstances. It would have to benefit your creditors though and would almost inevitably have very strict no-credit transaction guidelines. It's so rarely given though that you'd be best not wasting your time. If you're found to be evading your agreement responsibilities by trying to misdirect money then you'll find the OR's powers can be pretty draconian in extending your agreement.

Best advice: Stay as a permie until your agreement expires. All your permie benefits such as healthcare, pensions, paid holiday, sick pay, etc won't come under the arrangement.

Second best advice: Contract through an umbrella but be prepared to be poorer overall than as a permie because you'll still get the £1200 pcm limit but you'll have to fund your own benefits.

[lucylucy]

Not dodging responsibilities

I should have explained more in my original post. I am not trying to dodge my responsibilities in paying the official receiver, but I do want to rebuild my life and also need to be able to leave some money in the company in case there are gaps in my contract. I will continue to pay the OR what has been agreed. What I really need to know is will the Official Receiver accept this situation or will they make a grab for all the money the company is paid because it is actually me that is earning it regardless of what salary or dividends I am paid. Many thanks for the advice so far, it's all good.
Lucy

[SueEllen]

I should have explained more in my original post. I am not trying to dodge my responsibilities in paying the official receiver, but I do want to rebuild my life and also need to be able to leave some money in the company in case there are gaps in my contract.

The others have explained clearly that you would be acting like it as the set up of your business would be artificial.

The only way to rebuild your life is to wait until the 3 years are up.

Even after that you will have problems in obtaining bank accounts, insurance and getting other credit to run your business if you are a director or acting like a director.

I will continue to pay the OR what has been agreed. What I really need to know is will the Official Receiver accept this situation or will they make a grab for all the money the company is paid because it is actually me that is earning it regardless of what salary or dividends I am paid.

What do you think considering the previous posts? Do you actually think you will be legally allowed to run a company? Do you want your bankruptcy discharge suspended? Do you want a restriction order?

[craig1]

I should have explained more in my original post. I am not trying to dodge my responsibilities in paying the official receiver, but I do want to rebuild my life and also need to be able to leave some money in the company in case there are gaps in my contract. I will continue to pay the OR what has been agreed. What I really need to know is will the Official Receiver accept this situation or will they make a grab for all the money the company is paid because it is actually me that is earning it regardless of what salary or dividends I am paid. Many thanks for the advice so far, it's all good.
Lucy

You'd have to be pretty damn convincing to persuade them to not take every spare bean in the company as you describe it above.

You'd need to make a strong case for why you'd leave money in the company rather than pay your creditors, they'd also look very poorly at any reduction in the money they receive if you leave a permanent job. The killer would be, as mentioned above, that if you're in a position to dictate the company's finances then you're acting in the role of a director and you're setting yourself up for a big criminal fall. You have to remember that the OR staff have seen plenty of people trying to hide money from them and will look at any situation like this in a very suspicious light with very little benefit of the doubt.

My point above wasn't made lightly, bite the bullet and either stay permie or go through an umbrella. Going contracting via a ltd company, either with you as a director or as shadow director, is far too complex and is likely to come back and bite you.

Going bankrupt isn't a killer, ride out your time and then get back into the mainstream. If you try to work around the system then it will bite back hard.

[lucylucy]

Good Advice

Thanks for all this advice, it's far better to know now that make a mistake, and I have made few.
Could someone pleas explain if am umbrella company would be any different, would it be any real benefit?

Thanks

Lucy