Legal Advise

Although I have already PM'd our resident legal helper I thought I'd put it out in the open for more feedback.

A friend has asked me to join him in setting up a property company that will mostly have to do with Property abroad. He has told me that he knows someone that has a lot of spare cash and he will be our main client.

Now my position will be as Director fo the company. If this "customer" is dodgy or his money is dodgy will I be held accountable?

In other words money laundry???

Money Laundering Regs 2003 - http://www.opsi.gov.uk/SI/si2003/20033075.htm

The only big one I remember is that you need to ensure you get correct identification from people. I imagine there's a teensy bit more to it than that too

Should point out, I'm not a lawyer - but I did see an episode of Kavannagh QC so I think that makes me amply qualified.

that is a biiiigggg document

Did nobody else have a view on this?

Just to satisfy Ed...........

IMO the fact you feel the need to ask the question and thus have reservations about the source of the £'s almost answers your own question. That and you obviously dont trust your friend as you are looking to cover your own back. All seems a bit shady acres to me.

Also why does he want you to be MD of the company if this venture is his idea...are yo the fall guy?

The mysterious investor is going to want to make a sizeable return on his wedge if he is providing all the capital, so your margins might be squeezed anyway, even if it transpires to be legit. Also what happens if he promises alot but delivers little...you will be the ones that get boned.

Yes movies have warped my paranoid mind but hey ho

Originally Posted by Ed

Did nobody else have a view on this?

Well, yes and no.

Do I have any personal experience of it? Nope.

However, since this is a client relationship to supply all the initial money, it has the potential to go very very wrong.

As purely an example...

Lets say you wave goodbye to your job, and everything rests solely on this new venture. Fine, great, the client has promised money on a given date. However, that promise is under the condition that he sees a return (be that property or money), and for reasons beyond your control, that return is not realised. The client then says that because (for example) their property isn't available to them, they aren't going to pay. Or they could say that they will pay, out of good faith, but only a small percentage of the money you were expecting.

Do you have the cash reserves to comfortably allow for this??

Back on the specific question asked, and this is strictly my opinion; when I deposit money in my children's bank account, I never have to tell the bank where I obtained that money from. Yes, I have to pay tax on it, but I never have to state where it came from (and in the past it's been sizable chunks due to work bonuses etc). Granted I'm not a business, but even back when I was self employed, I never had to show where the money had come from.

That's the tax man's job. If your expenditure outweighs your income, then the tax man would be interested.

Of course, I could be barking in the wrong forest, let alone urinating on the wrong tree (I got that right, didn't I? ) and you could be liable, but I reckon that it'd be minimised. You didn't find the client, and for all intents & purposes, you may never have any dealings with the client. In which case you leave yourself open for a possible charge of negligence, but surely nothing more (innocent until proven guilty etc - haha).

2p, spent. Factual? Not on your nelly! Opinionated, very.

My other half has been a Director in a national company, as far as I am aware if it is a limited company, you can only be held accountable for the amount specified, in his case it was £10. Strange but true.

I think that this is a potentially hazardous area. I think that the possibilities of money laundering are very real. It's not good enough to turn a blind eye and not ask questions. You have to know your client and to know where the money is coming from.

As Kamakazy said I was a director of a national company for six years and specifically Company chairman for a while.

The personal liability limit commented on isn't strictly true. Certainly as a director you will have responsibilities and these are detailed in documents you can get from Company House. basically you will need articles of memoranda and so on and this will state the personal liability of each director and it can be whatever you want it to be but typically its £10. So you can make genuine mistakes and if things go wrong e.g. the market goes then you cough up your tenner to the reciever and all is done. There are extreme cases however where your liability can go beyond the tenner and and is unlimited. I can't recall specific examples but would suggest that acting irresponsibly and thus not in the interests of the company or its debtors could well be one. Basically you can lose everything, home, car, SV!

This only applies to a limited Company and be such it must be registered with Company house. You also have to submit annual audited accounts to them. You have to know what kind of company you are getting into.

Other 'companies' are more likely to be partnerships. No protection here. if it goes belly up you can lose everything, period.

But I tend to sense something distasteful in all this. Whether its a Ltd Co. or a partnership if its dodgy dealing its criminal law?

Whatever - it is your responsibility under company law to know what you are doing. So you need every detail about this, who the client is etc. You need to see the proposed articles of the company - everything. The client must enter into a detailed legal contract with 'your' company. The contract should be looked at by your legal rep (someone knowledgeable in such matters) and this is not a cheap process.

The company I was a director of (and in my case by definition, director meaning that I was a member of the board, sometimes director can be simply a grand title for an employee directing business - not the same thing).

To give an example - in 'my' company we had a number of 'partnerships' with other national specialist companies to produce something these included Software companies, publishers, insurance companies (incl Allianz Cornhill to drop a name ) We established a standard contract which took some time to develop - in some cases jointly with the partner co but almost always through legal advisors at a quid or two per hour! They usually ran for 3-5 years when the arrnagement would be reviewed and usually renewed. But at each renewal the contracts were trawled through by all parties often over several weeks and months.

Why am I telling you all this? Running a company properly and honestly is no push over and shouldn't be entered lightly so go in with your eyes wide open and don't get blinded by the image/excitement of being a Co director it can be hard work.

If this is a partnership and your a bit nervous you must make sure everything is absolutely right and just someone I know a geezer... personally not a risk for me. And you should really know the business you enter into don't rely on a partners apparent expertise unless it comes with evidenced performance over some years, references etc etc. Don't rely on friendship in business - its irrelevant - its business.

Sorry its way over your actual question but the question itself raised questions to me which I've tried to deal with here. Just my rambling thoughts to share my experience, But please be aware I'm no expert which is why I used professionals to help. You can get proper training (which we did) e.g. how to be a Co director and your responsibilities, its scary stuff and bl**dy expensive.

Originally Posted by Baph

Well, yes and no.

Do I have any personal experience of it? Nope.

However, since this is a client relationship to supply all the initial money, it has the potential to go very very wrong.

As purely an example...

Lets say you wave goodbye to your job, and everything rests solely on this new venture. Fine, great, the client has promised money on a given date. However, that promise is under the condition that he sees a return (be that property or money), and for reasons beyond your control, that return is not realised. The client then says that because (for example) their property isn't available to them, they aren't going to pay. Or they could say that they will pay, out of good faith, but only a small percentage of the money you were expecting.

Do you have the cash reserves to comfortably allow for this??

Back on the specific question asked, and this is strictly my opinion; when I deposit money in my children's bank account, I never have to tell the bank where I obtained that money from. Yes, I have to pay tax on it, but I never have to state where it came from (and in the past it's been sizable chunks due to work bonuses etc). Granted I'm not a business, but even back when I was self employed, I never had to show where the money had come from.

That's the tax man's job. If your expenditure outweighs your income, then the tax man would be interested. Don't rely on this, the taxman can ask you to justify income or you pay higher tax. If its a Ltd company you MUST have audited accounts. Even when you think you are doing things right auditors can find mistakes. Then there is VAT man. If you think the taxman is difficult...! Don't rely on arguing your way out in this arena this is big time and these geezers are experts. You will only slip through if your dodgy in which case running a dodgy Co. Don't do it.

Of course, I could be barking in the wrong forest, let alone urinating on the wrong tree (I got that right, didn't I? ) and you could be liable, but I reckon that it'd be minimised. You didn't find the client, and for all intents & purposes, you may never have any dealings with the client. In which case you leave yourself open for a possible charge of negligence, but surely nothing more (innocent until proven guilty etc - haha). Company director - you are responsible for knowing all your dealings and clients and to have thoroughly checked them out - legal bods can help you do this quite easily. Don't think you can blame the other director it won't easily wash and ignorance of the law is no excuse. There can be mitigating circumstances but you're a chnacer if you want to rely on that.

2p, spent. Factual? Not on your nelly! Opinionated, very.

As I said before check what director really means and the type of company i.e.registered Ltd or a Partnership. Being a Director of a registered Ltd Co. is serious business IMvHO