When to use a Members' Voluntary Liquidation to close a company
SPONSORED: A Members' Voluntary Liquidation (MVL) is as a formal process that allows the directors of solvent companies...
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A lien is when you hold on to someone else’s property against a debt due to you.
Types of lien
There are two types of lien:
The work in question must have been done at the client’s request and the client must know or be able to calculate the sum due.
You shouldn’t exercise a lien when inappropriate, such as during ongoing arbitration, legal proceedings, or agreement reached.
So who owns what accounting records?
This is also a legal minefield. If you are acting as principal more will belong to you than if you act as agent. The distinction is significant in relation to the ownership of documents created by the member during the course of the engagement.
Most members will act as agents so in general, ownership of accounting records is:
The client owns:
The accountant owns:
THE IFA’S POSITION
The legal situation is not straightforward and must be approached with caution. If you decide to exercise a particular lien, document your reason for doing so and consider legal advice. Ensure that exercising liens is included in letters of engagement. See letters of engagement templates here: https://tinyurl. com/y35k72gs
Members should consider the impact a lien will have on reasonable transfers of information to new accountants. The Code of Ethics Section 210 (https://tinyurl.com/y89sextj) makes it clear the former accountant must provide the new accountant with all reasonable transfer of information requested, free of charge and all reasonable transfer information must be provided even where there are unpaid fees – a lien cannot be exercised in this respect.