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. 

Please note that the above is provided for illustration purposes only and comprises a short view of extremely complex insolvency and other legislation. This is a complicated area and specific advice must be sought before undertaking any course of action or before refraining from any course of action. Gore and Company takes no responsibility for any loss incurred to or by any person who either acts or refrains from acting on the basis of the above or of any other item published on this website. The above note may not be reproduced without the prior written consent of Gore and Company.

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