Q&As

The director of a company in liquidation has an outstanding directors loan account which the liquidator is seeking to recover. The director has promised to pay the outstanding loan amount but can only do so once his property has been sold. The liquidator wants to secure this debt in the meantime by way of a second charge over the director’s property. Would the charge be caught by the Consumer Credit Act? And if so, are any exemptions which the liquidator may be able rely on?

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Produced in partnership with Eleanor Stephens
Published on LexisPSL on 13/03/2020

The following Restructuring & Insolvency Q&A produced in partnership with Eleanor Stephens provides comprehensive and up to date legal information covering:

  • The director of a company in liquidation has an outstanding directors loan account which the liquidator is seeking to recover. The director has promised to pay the outstanding loan amount but can only do so once his property has been sold. The liquidator wants to secure this debt in the meantime by way of a second charge over the director’s property. Would the charge be caught by the Consumer Credit Act? And if so, are any exemptions which the liquidator may be able rely on?

The activities which required a consumer credit licence from the office of fair trading under the Consumer Credit Act 1974 before 1 April 2014 now broadly require an authorisation, under Financial Services and Markets Act 2000 (FSMA 2000), FSMA 2000, Pt 4A, from the Financial Conduct Authority (FCA).

There is a general prohibition under FSMA 2000 that no one may carry on a regulated activity in the UK, or purport to do so, without being authorised or exempt. If a person or firm does so, there are a number of significant consequences. These include:

  1. criminal sanctions

  2. unenforceability of agreements entered into by an unauthorised firm or person

An activity is a regulated activity if it is:

  1. an activity of a specified kind which is carried on by way of business, and

  2. relates to a specified investment or property of any kind

For more detailed information about what it means to carry on a regulated activity by way of business in the UK, see Practice Notes:

  1. What are regulated activities?

  2. What does 'by way of business' mean?

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