How to Manoeuvre Around the Corporate Veil

If we have heard it once then we have heard it 1000 times: we cannot recover our money because the directors of the company have placed it into liquidation. In this day and age this is a regular occurrence and can place creditor companies under extreme pressure, simply because money that they were relying on will now never arrive therefore squeezing their cash flow.

Often, when trying to recover money owed, creditor companies are promised by directors of the debtor that “payment will be made within a week, or payment is in the post, or payment is with the accounts team for processing”.  Essentially the same as saying, don’t worry you will be paid.

This in turn gives the creditor a degree of comfort in waiting for their unpaid monies, and may defer any recovery action the creditor may have wished to take. However, the director will most likely know full well that they have no intention of paying this money and may simply be waiting for the company to enter liquidation, thereby causing all of its creditor’s substantial losses.

When such issues happen, the creditors immediate reaction is to sigh and start liaising with the liquidator in order to try and recover at least something towards what they were owed, which often becomes so administratively burdensome that the process is frequently given up on. However, the key here is to rewind and go back to the promise made by the director to pay you – the ‘don’t worry you will be paid’ statement. If the director did know (or at least should have known) that the company was unable to pay its debts and he was just ‘buying time’ this potentially makes him PERSONALLY responsible for the sums owed on the basis of a fraudulent misrepresentation claim i.e. that the director made a fraudulent claim to you, in order to feather his own nest and/or to keep as much money as possible for himself before putting the company into liquidation. Such a claim, although tougher than normal to prove, is critical where a legal case for recovery of money owed is being considered, as it circumvents the corporate veil and places that director’s PERSONAL assets on offer as ‘fair game’.

This is always a claim that we at Pinder Reaux will consider, no matter how small the amount in question. A throw away comment such as “you will be paid – don’t worry” can give rise to a HIGHLY SUCCESSFUL claim for recovery of moneys owed, regardless of what has happened to the company.

John Spyrou

@john_spyrou