Liabilities of resigning director..

dude66

I was a director of a LTD company with only 2 directors. For personal reason I decided to resign as director. I have 50% of shares(worth very little).
My bussiness partner wants to continue the business and appoint a new director.
But both him and our accountant reckons I am liable for both PRSI and the VAT bill. Is this true? The only contract we signed is towards to bank against overdraft. This I believe I am liable.
Can someone guide me please.
Thank you.
Dude66:D

swanvill

On the basis of information you have supplied. I would disagree with them, the company is liable for all taxes, your liability should be limited to the value of your shares as a shareholder. I presume that you were not acting as the finance director and at absolute worse you might be only liable for half.
I recommend that you contact the company bank and inform them you are no longer a director of the company and wish to remove your guarantee. I would hire another accountant to file the form to resign as a director ASAP. It should not cost you a lot and if you are walking away from it, then make sure that you sever your links thoroughly.

Best of luck.

The CCAinsider

From what you said, you may have a personal tax liability for wages paid to you as a director, but you could not be liable for VAT. The bank are unlikely to release your personal guarantee easily and you can’t just resign as a director, legally there must be at least two directors, so until a new director is appointed you can not resign. You should not resign until the personal guarantees are released. You should have some control over the company while you are personally guaranteeing its debts. Get a new independent accountant.

dude66

Hi guys,
Beeing to the accountant again he still maintain that I am liable for the VAT, the bank overdraft, the payroll liabilities..so he reckons I must pay 16000 euro(half of liablities) to be able to resign as director and have nothing to do with the business.This is taking the business assets and stocks into considaration.:mad:
Really confused.
Dude66

ABEasy

dude66 wrote: »

Hi guys,
Beeing to the accountant again he still maintain that I am liable for the VAT, the bank overdraft, the payroll liabilities..so he reckons I must pay 16000 euro(half of liablities) to be able to resign as director and have nothing to do with the business.This is taking the business assets and stocks into considaration.:mad:
Really confused.
Dude66

That accountant is talking out of his @rse. As a Ltd company all shareholders/directors have limited liability unless it is proven you have traded recklessly/fraudently in which case the limited liability may be lifted by the courts. You may be liabile to Income Tax if the PAYE on your salary is not paid to the revenue, but this will only happen when you file your income tax return. If you owe the company funds, i.e. withdrew more than your salary, this amount is due back to the company.

I recommend you either write to the companies secetary with a formal letter of resignation or as a shareholder call an EGM and resign. Should the company fail to accept your resignation send the form B69 to the CRO ( see www.CRO.ie ). Also contact your bank immediately and ask to freeze the account until this mess is sorted out (you don't want the company increasing it's liabilities to the bank and hence the amount you will have to repay should the company fail to repay them). If the a/c is not overdrawn then formally write to them withdrawing your letter of gaurantee.

Off the topic, it seems the company is in trouble, is it solvent? if not you should consider calling a directors meeting with a view to putting the company into liquidation.

p.s. feel free to print this off and show it to the present accountant

dude66

Hi ABeasy,
Thank you for your input!! YES the company is in trouble! As it stands it is at -60000 euro...but putting all assets and stock it is "down" to 30000euro...My business partner insist on keeping going...I don't know why...He thinks the situation is "not too bad!!":mad:
Sorry what do you mean is the company solvent?
Thanks again.
Dude66:(

ABEasy

dude66 wrote: »

Hi ABeasy,
Thank you for your input!! YES the company is in trouble! As it stands it is at -60000 euro...but putting all assets and stock it is "down" to 30000euro...My business partner insist on keeping going...I don't know why...He thinks the situation is "not too bad!!":mad:
Sorry what do you mean is the company solvent?
Thanks again.
Dude66:(

Dude,

Looks like you're in a bit of a tricky situation here. The company is insolvent as its liabilities exceed its assets. If your partner wants to keep going that is up to him. You have a few options here assuming you don't want to continue;

-Offer him your shares in the company, resign as director. Approach the bank and offer to pay half the overdraft in return for them withdrawing the letter of gaurantee you gave them. (In the meantime ask the bank manager to freeze the account until you reach agreement).
-Resign as director and let him trade away, if he can trade out of trouble, you can then withdraw your letter of gaurantee as the overdraft will be paid off. Should the company go bust, you will only be liable for the value of your letter of gaurantee.
-Call a creditors meeting and put the company into liquidation, you will be liable for the gaurantee, but may have to gaurantee the liquidators fees (depending on the value and liquidity of the assets the company holds).

I think the first option would the most cost effective. Remember you don't have to pay the companies debts.....

Good luck

dude66

Thank you very much ABeasy for your help. Highly appriaced.:D
Dude66:D