Worried About a Directors Loan Account?
In many enquiries from directors of struggling companies, we find that “Directors Loan Accounts” are a problem. The history will be that the company has been making profits in the past and the accountants advise that tax can be saved by paying directors a small salary and the balance of drawings being put to a “loan account”. Then the company strikes troubled times.
So what’s the problem?
Well, if the company enters any form of insolvency administration, such as liquidation or voluntary administration, then the first thing the liquidator will look at is Directors Loan Account and the liquidator will then, quite reasonably, require the amount to be repaid. If you are in this position then we suggest you CALL US NOW for CONFIDENTIAL FREE ADVICE on how to deal with this problem.
If you’d like more information read on.
What can be done?
Options available include the following:
- Repay the debt you personally owe to the company.
- Offset any loans the directors have made to the company (this is called set off).
- Take your full salary but reduce the cash you take out of the business to gradually offset the account. So pay yourself $5,000 per month but take $1,000 only with the balance being set against the loan account. Remember the company will need to pay PAYG on the full $5000.
- Use a Voluntary Administration to come to an arrangement where all parties are better off.
What happens in liquidation if we have a Directors Loan Account?
In liquidation the liquidator can demand that directors repay their loan accounts to the company. It is one of the first things the liquidator will look at. The liquidator may take legal action to make directors pay this or even make you bankrupt. So, yes, you could lose your house if your director’s loan account is overdrawn and not repaid. If you are worried why not CALL US NOW for CONFIDENTIAL FREE ADVICE.
