Editor's Blog11 mins ago
why is he still called a Millionnaire??
11 Answers
Why is that man Chris Foster from Shropshire still being called a Millionnaire even though his company Ulva Ltd, had gone into liquidation and owed about �800,000 in tax. It also faced legal action from one of its suppliers for thousands of pounds
?????
http://news.bbc.co.uk/1/hi/england/shropshire/ 7594411.stm
sad news but hes not a millionnaire is he if he owes so much money???
?????
http://news.bbc.co.uk/1/hi/england/shropshire/ 7594411.stm
sad news but hes not a millionnaire is he if he owes so much money???
Answers
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Chris Foster didn't owe anyone a single penny (unless, of course, he had personal debts which weren't mentioned in that BBC report). He owned a limited company, which is a completely separate legal entity.
As an analogy, Richard Branson might set up a new limited company to try to break into a new area of business. If things go wrong, the company could go bust, owing millions (or even billions) of pounds of debt. Richard Branson wouldn't owe one single penny of that debt to anyone, and he'd still be a billionaire.
The whole point about setting up a limited company is that it divorces the liabilities of the company from those of its owners and directors. Suppose you employ a building company, run by Fred Bloggs and trading as Fred Bloggs Ltd, and the company goes bust just as they've removed your roof (leaving you with the rain pouring in). Fred Bloggs doesn't owe you a penny and he can keep his fortune. 'Fred Bloggs' and 'Fred Bloggs Ltd' are entirely separate legal entities.
Chris
As an analogy, Richard Branson might set up a new limited company to try to break into a new area of business. If things go wrong, the company could go bust, owing millions (or even billions) of pounds of debt. Richard Branson wouldn't owe one single penny of that debt to anyone, and he'd still be a billionaire.
The whole point about setting up a limited company is that it divorces the liabilities of the company from those of its owners and directors. Suppose you employ a building company, run by Fred Bloggs and trading as Fred Bloggs Ltd, and the company goes bust just as they've removed your roof (leaving you with the rain pouring in). Fred Bloggs doesn't owe you a penny and he can keep his fortune. 'Fred Bloggs' and 'Fred Bloggs Ltd' are entirely separate legal entities.
Chris
thanks for the Advanced details Chris!!
does that mean he just lost his company..... ? which means he just owes company's debts, but still a millionnaire?? i still dont get it! couldnt he sold his mansion etc to pay off the debts or was his home was liable? oh i dunt know what im talking about
lol mayb im just a bit dumb :P
does that mean he just lost his company..... ? which means he just owes company's debts, but still a millionnaire?? i still dont get it! couldnt he sold his mansion etc to pay off the debts or was his home was liable? oh i dunt know what im talking about
lol mayb im just a bit dumb :P
Hi Whitebear.
The word 'limited', in 'limited company', means that the directors of that company only have (very) limited liabilities in terms of the debts of that company (if it goes bust).
If someone sets up a limited company, he has to follow various rules in regard to such things as having the accounts properly audited each year (and then forwarded to Companies House). However, the directors of that company (which often might just mean the guy who set it up and his wife) are free to determine how much profit to take from the company (to put into their own pockets). They're meant to leave enough in the company's accounts to pay any debts but sometimes things go wrong and the company goes bust.
There would be nothing to stop a director from selling his house, and putting the money into the company, to try to prevent closure. But such a move would rarely make economic sense. It's usually far simpler for the directors to let the company go bust. When the creditors come looking for money, the (former) directors can lawfully say 'Nothing to do with us, mate. Get knotted'. They don't owe anyone anything. It was their company which owed the money and that company no longer exists.
It's just the same if, say, you were to order an expensive 3-piece suite from a shop (and pay up front). While you're awaiting delivery, you find out that the firm (which is a limited company) has gone bust. You probably won't get a penny back from the receiver because 'preferred creditors' (like the tax man) get 'first bite' at any money which is left in the company. You might know that the (former) boss of the company lives just up the road from you, in a massive mansion with a fleet of Rolls-Royces and a private jet. When you knock on his door and ask for your money back he can simply (truthfully) say "I don't owe you a penny".
Chris Foster was in a similar position to my fictitious businessman. He
The word 'limited', in 'limited company', means that the directors of that company only have (very) limited liabilities in terms of the debts of that company (if it goes bust).
If someone sets up a limited company, he has to follow various rules in regard to such things as having the accounts properly audited each year (and then forwarded to Companies House). However, the directors of that company (which often might just mean the guy who set it up and his wife) are free to determine how much profit to take from the company (to put into their own pockets). They're meant to leave enough in the company's accounts to pay any debts but sometimes things go wrong and the company goes bust.
There would be nothing to stop a director from selling his house, and putting the money into the company, to try to prevent closure. But such a move would rarely make economic sense. It's usually far simpler for the directors to let the company go bust. When the creditors come looking for money, the (former) directors can lawfully say 'Nothing to do with us, mate. Get knotted'. They don't owe anyone anything. It was their company which owed the money and that company no longer exists.
It's just the same if, say, you were to order an expensive 3-piece suite from a shop (and pay up front). While you're awaiting delivery, you find out that the firm (which is a limited company) has gone bust. You probably won't get a penny back from the receiver because 'preferred creditors' (like the tax man) get 'first bite' at any money which is left in the company. You might know that the (former) boss of the company lives just up the road from you, in a massive mansion with a fleet of Rolls-Royces and a private jet. When you knock on his door and ask for your money back he can simply (truthfully) say "I don't owe you a penny".
Chris Foster was in a similar position to my fictitious businessman. He
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