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Legal matters

Advice on divorce and dh's small business

26 replies

TieAYellowRibbon · 23/02/2012 13:22

I am company secretary for my dhs business, and am an authorised signatory for cheques on his business bank account. Things are not good between us and I am planning an escape for dc and I, and whilst I can save some cash before we go its not nearly enough for a deposit on a rental place. I am worried about what we will do for money before the divorce has been finalised, would I be within my rights to issue a cheque for x amount into my bank account just before I leave, without him knowing? He would be absolutely raging with fury (no domestic violence ever between us but he does have an impressively short fuse) and unless I know for certain that I am not breaking any law he would try to convince me that he?ll have me locked up.

Am also keeping my eye on our joint savings as he has a habit of dipping into it.

Thinking about it I must be a shareholder too as in the past he?s paid money from the business into my account (I then transferred it to him) as a dividend to use up my tax allowance when he?d reached the upper earnings limit on his income. Not sure whether this is relevant, or whether I can even locate his cheque book if it turns out I could do this.

Any experience or advice here would be very welcome.

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NatashaBee · 23/02/2012 13:26

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MrAnchovy · 23/02/2012 13:32

You can't do this, it would be theft. You wouldn't be locked up for it, but you could face criminal charges and it would make dealing with your interest in the company as part of the divorce settlement a lot messier.

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SoupDragon · 23/02/2012 13:33

I rather think that would count as embezzlement.

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TieAYellowRibbon · 23/02/2012 14:35

Gosh I wouldn't be trying to embezzle anything- not what my objective is! Want to be squeaky clean ( unlike him and his dodgy deals)

Thanks for sensible advice.

So when he withdraws funds this is likely to be as a dividend? Guess it would be. Who gets decides what dividends are payable and to which shareholders? If it's the company secretary then ...

I am just worried that he will take it all and say he's spent it but keep it in a big box under the bed/ give it to fil to look after/ transfer ownership of his flash cars to fil and then transfer it back again after settlement has been agreed.
.

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prh47bridge · 24/02/2012 00:42

The position with dividends depends on the company's Articles of Association. Normally for a private company they are decided by the Directors.

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Collaborate · 24/02/2012 09:42

Find out what interest you have in the company and then come back here. Find out too whether you're just a secretary or a director as well.

You'd be entitled to retain copies of documents relating to the company but for God's sake don't freeze the bank accounts. I suspect a judge would be v. annoyed with you if you prevent the business from functioning. Whilst personal accounts should be wound down and closed on separation, the business bank accounts must continue. I don't think anyway you'd have the authority as company secretary to freeze the accounts.

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TieAYellowRibbon · 24/02/2012 15:02

Thanks for that Collaborate. How do I find out what interest in the company i have?

I wouldn't think about freezing the accounts tbh anyway, as dh's business is just him and all the account is made up of is what he invoices for his time. So vatand tax etc needs to cone out if the balance, plus his pay, it was really just the surplus I was thinking about, as he normally blows it something ridiculous thy I have no say it (ie err actually dh we need a new oven this one doesn't work properly)

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Collaborate · 24/02/2012 15:40

I would have said you should ask the company secretary, as they are responsible in law for keeping Companies House up to date with appointments. But hey! It's you!!

If you are just the Secretary and not a director you have no right (a company lawyer may come along and tell me I'm wrong) to withdraw what you want. I think it's different if you're a Director, but I'm only a family llaw solicitor.

If you want to withdraw half the surplus, take into account corporation tax, and leave enough in the company to pay this. Only take half - he is entitled to the other half. I'm assuming here that you are a co-Dircetor and own 50% of the shareholding.

In reality, if you want to receive advice you can rely on, consult a solicitor.

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MrAnchovy · 24/02/2012 16:37

I would have said you should ask the company secretary, as they are responsible in law for keeping Companies House up to date with appointments.

This is no longer the case.

I think it's different if you're a Director

No it isn't. Directors can only withdraw money from the company if it is in the interests of the company to do so (or as they are required to do so by law).

If you want to withdraw half the surplus, take into account corporation tax, and leave enough in the company to pay this. Only take half - he is entitled to the other half. I'm assuming here that you are a co-Dircetor and own 50% of the shareholding.

Good grief, that would not follow the procedure in the Articles for declaration or distribution of a dividend and would therefore be theft, even if the OP were a director which I will bet they are not.

In reality, if you want to receive advice you can rely on, consult a solicitor.

At last something I can agree with - what you want here is an equitable divorce settlement and you can only get that by going through the process represented by someone who knows what they are doing and understands every detail of your personal circumstances.

As far as getting money out of the company legally is concerned, you cannot do this without the agreement of the director(s).

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Collaborate · 24/02/2012 19:20

MrA - thanks for dragging me into the 21st Century!

If it's not the Secretary, who now has the responsibility?

In a divorce situation one spouse will usually retain day to day control of the business and draw an ongoing income from it. At the end of the accounting period the accountant will advise how best to treat those drawings. Often they are deemed to have been dividends.

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prh47bridge · 25/02/2012 01:20

A private company no longer has to have a secretary at all. The responsibility for keeping Companies House up to date now lies with the company and its officers.

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MrAnchovy · 25/02/2012 02:24

You can't just 'deem' a payment to be a dividend after the event, a dividend must be approved and paid in accordance with the Articles and the Companies Act.

Collaborate I think you are mixing up the situation where there is a family business run as a sole proprietorship and a limited company: I don't think this lack of clarity is going to help the OP.

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Collaborate · 27/02/2012 00:28

In reality the sums drawn are treated as a drawing of capital, which can be replaced with a later voted dividend.

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MrAnchovy · 27/02/2012 11:41

I don't think you mean a drawing of capital: again, this term is not generally used in relation to a company. Withdrawing capital from a company requires a special resoltion of the members which must be filed at Companies House within 15 days together with other documents.

It is common for a company to make payments by way of loan to a shareholder and later replace that loan with a dividend, but quite apart from whether the OP could lawfully make such a payment (that would depend on the detail of the specific arrangements within the company), as it would be a loan the company could demand repayment which would defeat the object of taking it in the first place.

Of course if you took £500 for deposit on a flat in this way, the CPS probably wouldn't be interested and a civil court may well defer repayment until settlement of the divorce case. However if you took £50,000 you could expect to have the book thrown at you.

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TheRedSalamander · 27/02/2012 16:41

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bigwombat · 27/02/2012 17:16

I agree with MrA - there is obviously a difference between a limited company, where there are dividends but no drawings, and a sole trader, where there are drawings but no dividends. In a limited company, during the accounting period, amounts may be withdrawn which are classified as director's loans until a subsequent dividend is formally declared after ensuring the company is solvent after taking account of all creditors, including corporation tax on current year profits if applicable.

Op - you are entitled to dividends if you are a shareholder, but the directors must formally declare a dividend and minute it. It is not really ok to withdraw funds from the company for a non-business purpose without consent of the directors unless you are the sole director, which doesn't sound like it is the case.

Funnily enough your set up is similar to mine as I do all the books and admin for dh's business, am company sec, co-director and shareholder, but all the work is done by dh. He blows all the income, when we too need a new oven!!

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sneezecakesmum · 27/02/2012 21:52

I would transfer out half the assets of your joint account on the day you leave. There is no issue with joint bank accounts, unlike the complications of the above business accounts! Also take copies/relevant documents/bank statements etc with you.

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LadyEmmaHamilton · 27/02/2012 21:57

I agree completely with MrAnchovy

You have almost no authority as company secretary and any action you take without the authority of the directors/shareholders is illegal in company terms.

Get yourself to a solicitor and get this sorted out properly. Even if he's dipping into the joint account (and it's in his joint name, why shouldn't he, in theory at least) it should all come out in the wash. Helping yourself to company funds, even as a "loan" will NOT come out in the wash and will make life a whole heap more complicated.

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MrAnchovy · 27/02/2012 23:11

Waves to LadyEmmaHamilton (with one good arm?) - I'm an accountant actually Grin

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whatsnext2 · 28/02/2012 09:26

Bit worried by this thread. I'm recently seperated, Company sec, do admin and shareholder in Ltd company. ExH just withdrawn large sum of cash from Company saving account which was set aside for Corp Tax to buy himself new car, says will repay money but never has done in past. He is equal shareholder and Director.

What do you mean will NOT come out in wash? What are implications?

Thanks

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Collaborate · 28/02/2012 09:53

From reading the above, I'd say that your H has not done things properly (unless (Mr Anchovy?) a director can authorise by themselves a loan to him/herself). However if you are getting divorced this will all be resolved in the divorce courts and not in the chancery division of the High Court.

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LadyEmmaHamilton · 28/02/2012 10:29

A company can loan money to a director, but it would have to have shareholder approval for that kind of dum. If the company doesn't pay the tax and HMRC wind the company up (make it insolvent) your ExH will be asked to repay the sum in question. I would ask more about this - if he can't repay it, there will be serious implications.

NEVER be a director of a company where you don't have all of the information about what's going on.

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MrAnchovy · 28/02/2012 22:20

I don't think whatsnext2 is a director? The office of Company Secretary means virtually nothing now.

Neither the current model articles nor the previous Table A require shareholders approval for loans to directors or shareholders so yes, a sole director can approve a loan from the company to himself (unless the company has specially amended articles or he is bound by a shareholders agreement).

Collaborate is right - all this is bound up in your divorce settlement and if he has extracted money from the company to hide it from you, you need to make sure your solicitor is (literally) on the case.

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whatsnext2 · 29/02/2012 09:12

Thanks, I'm not a director.

He hasn't hidden it - I just can't stop him! So long as it gets taken into account at the end of the day in the settlement I guess thats the best I can hope for.

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babybarrister · 29/02/2012 10:31

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