Overdrawn Directors Loan Account
Many companies are provided with financial support by their directors who lend money to their company to provide working capital to support the operation of the company.
If a company becomes insolvent any amount which is owed to the directors at the time the company enters into liquidation or another type of insolvency process will be an unsecured debt owed by the company. This means that the outstanding director’s loan will be treated the same as all other unsecured debts and is therefore likely to result in the majority of the loan not being repaid.
Directors who arrange to repay some or all of their loans in a short period of time before liquidation of the company are likely to face a claim by the liquidator or Administrator of the company for repayment.
It is also not unusual for directors to borrow money from their companies resulting in “overdrawn” directors’ loan accounts. This may mean that when the company becomes insolvent the directors are personally liable to repay the company the money they have borrowed from the company.
If you are concerned about directors’ loans call now and speak in confidence to a member of our team. We will give you straightforward confidential advice and help you make the decisions which are right for you.
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Client Story
Shirley and her husband were involved as partners in the purchase of a potential development with another couple. Unfortunately part way through the development the relationship between the 2 couples broke down and Shirley and her husband decided to exit the deal and hand over their share to the other party. This resulted in action taken against Shirley’s husband and he chose to petition for Bankruptcy. At the time no action was taken against Shirley. However, some years later the other party issued a writ against Shirley and entered into a Deed of compromise to repay of £57,000 the debt by monthly repayments. Shirley’s sought advice from The Business Debt Advisor team on Shirley’s behalf. Shirley’s health had been seriously effected by a bout of cancer and the stress of the debt was effecting her recovery. As Shirley and her husband lived in rented accommodation and had minimal assets, it was clear that bankruptcy was really the only sensible option. The Business Debt Advisor team helped Shirley pull together financial information on her assets which were minimal plus her debts and income and expenditure. We helped her complete her bankruptcy application online and her husband who was still working, helped out with the application fee of £680. Within days Shirley was bankrupt and her experience of dealing with the Official Receiver was very positive. They agreed with her that she would affordable pay income contributions of £210 per month for a 3 year period.