Overdrawn Directors Loan

Overdrawn Directors Loan Accounts in Northern Ireland

When a director takes money from their company which is not classed as a salary or dividend payment, this must be logged as an entry in the director’s loan account. While this is a legitimate way to extract money from a limited company, it must be repaid.

If more money is taken out from the company than is put in, the director’s loan account becomes overdrawn. Should the company later find itself insolvent and is faced with the prospect of liquidation, an overdrawn director’s loan account can become a problem.

As the company is owed money from the director, this is classed as an asset of the business just as any outstanding payment from any other creditor would be. As part of a company liquidation process, the appointed insolvency practitioner is duty-bound to identify and realise the value of all the company’s assets so that this money can be used to repay the company’s outstanding creditors as far as possible.

With the overdrawn director’s loan account being classed as a company asset, the director will be asked to repay the overdrawn director’s loan account and bring it back to a nil balance.

In many cases, however, the director is not in a financial position to be able to clear the overdrawn director’s loan using personal funds. Unfortunately, matters of corporate insolvency tend to go hand in hand with personal financial difficulties. If this is the case, the experts at Northern Ireland Debt Solutions are here to help you navigate through the situation, whether this involves placing your company into insolvency proceedings, entering yourself into a personal debt solution, or both.

“Before the Debt Management Plan, I felt like I was drowning in debt with no way out. It gave me the structure and support to manage my repayments and negotiate with creditors. For the first time in years, I can see a clear path forward, and the stress of juggling bills is finally easing.”

Liquidating a company with an outstanding overdrawn director’s loan account can pose some problems, particularly if you are unable to bring the account up to date by repaying the money owed. By seeking the advice of a licensed insolvency practitioner at the earliest opportunity, can help you better understand your options and put a plan in place for dealing with both your company’s and your own debts.

Contact a member of the team today to take the first step.