What happens to my director’s loan account on liquidation?

This is a regular pitfall for directors. The simple answer is that the liquidator or administrator will be looking to a director to repay the whole amount together with interest. However, be careful, it may be that the loan account balance in the accounts or books and records is incorrect. There are usually a variety for reasons for this.

Salaries and dividends may have been treated incorrectly so that what appears to be a loan account balance should actually be reduced. Further, expenses incurred by a director may have been treated as personal, and debited to the loan account, without a proper consideration. On a fuller review, it may be that these expenses are rightly company costs and should be adjusted. 

Therefore, look closely at the amount claimed, and seek professional advice. 

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