Advice on Directors Implications

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Advice on Directors Implications

Overdrawn Directors Loan Accounts

Overdrawn Director Loan Accounts are when you, the Director, owes the company money. It could have accumulated through taking a loan or from taking too many dividends when there wasn’t enough profit.

In normal instances, it's not uncommon to have an overdrawn directors loan. However, if the company was too close to a formal process such as liquidation, then the overdrawn directors loan becomes an asset of the company and the liquidator will pursue YOU personally.

It's important you check this BEFORE entering into a formal process, otherwise you could be solving one problem but creating another one personally. Speak to us so we can asses any implication for you prior to making a decision.

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Overdrawn Directors Loan Accounts

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Personal Guarantees

Personal Guarantees are when the director signs a document, personally indemnifying a company debt should it default. They are common with bank overdrafts, commercial loans and other aspects of business finance.

You should always check whether something is personally guaranteed by looking through the paperwork. If the company fails, the lender will look to you, the Director, to pay the debt on behalf of the company. This should be considered when thinking of closing through a process of liquidation, or understanding the strategy on how to deal with it once the company is closed. We help directors daily regarding personal guarantee issues and help plan how to deal with them pre and post closure.

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Personal Guarantees

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Bounce Back Loan Misuse

The Bounce Back Loan was strictly for business use or benefit of the business, and you could apply for a maximum of 25% of the company's turnover (2019) or predicted turnover (backed up by substantial evidence).

However, when Directors have used it for personal benefit, the Liquidator will treat it as a Directors Loan or Illegal Dividends and will pursue the debt personally. If you structure your earnings on salary and dividends, it's essential to check with us BEFORE entering into a formal process, as you could fall into a trap.

We asses all aspects of the Bounce Back Loan before any decision is made on how to close the company. It's confidential and FREE.

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Bounce Back Loan Misuse

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Company name *

Is the business a Ltd company? *

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Have you taken a Bounce Back Loan? *

Yes
No

Does the business have VAT/HMRC arrears? *

Yes
No

What is the total amount of debt? *

When is the best time to call you? *

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Frequently Asked Questions

Can I be forced to Liquidate?

The short answer is yes - through a Compulsory Liquidation.

This is where a creditor petitions to close the company. It’s a court process and an Official Receiver will be appointed to investigate the Directors and realise / sell the assets of the company.

Can I write off an Overdrawn Directors Loan?

The only ways to repay a Overdrawn Directors Loan is by personally introducing money into the company, paying something on behalf of the company (i.e. a debt) OR declaring a dividend.

However, there needs to be sufficient profit and reserves to post the dividend otherwise it could be deemed an illegal dividend which is treated similarly to a Directors Loan in liquidation.

What happens to a Overdrawn Directors Loan in Liquidation?

It's repayable and forms part of the assets of the company. The Liquidators job is to get those assets back for the creditors so they will ask for it to be repaid in full once in liquidation.

It's essential a plan is addressed on how this will be dealt with BEFORE an Insolvency Practitioner is engaged. We have extensive knowledge in this field and help negotiate for you with our panel of licensed Insolvency Practitioners.

Get in touch

First name *

Last name *

Email *

Phone number *

Company name *

Is the business a Ltd company? *

Yes
No

Have you taken a Bounce Back Loan? *

Yes
No

Does the business have VAT/HMRC arrears? *

Yes
No

What is the total amount of debt? *

When is the best time to call you? *

How did you hear about us?

Message

Consent for storing submitted data *

I understand how my data will be used

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Can you get out of a Personal Guarantee?

This depends on what the director has signed. However, you can negotiate them once in liquidation and that would be based on the Directors personal assets and their value.

Personal guarantees are usually a sub-issue from closing an insolvent company, not necessarily a reason to not do it. We help Directors with how to negotiate personal guarantees and formulate a plan to repay them pre and post closure.

Get in touch

First name *

Last name *

Email *

Phone number *

Company name *

Is the business a Ltd company? *

Yes
No

Have you taken a Bounce Back Loan? *

Yes
No

Does the business have VAT/HMRC arrears? *

Yes
No

What is the total amount of debt? *

When is the best time to call you? *

How did you hear about us?

Message

Consent for storing submitted data *

I understand how my data will be used

Recaptcha *

How does liquidating a company affect me personally?

It doesn’t affect you personally as the limited company is a separate legal entity that owes the money.

So, when the company is liquidated the debt goes with it and it doesn’t affect the director at all. However, although a Director doesn’t owe the money personally themselves, the limited company does, and they are responsible for the company and making decision on behalf of it.

Be sure to understand any Directors Loans or Personal Guarantees before closing as these can affect you when liquidating as the debt will be repayable personally.

Will I be investigated if I go into Liquidation?

Yes, ALL Liquidators have to do a Directors Report which is submitted to the Insolvency Service, who can take further action like banning an individual from being a Director or imposing compensation orders.

The main things that are looked at are:

How long the company has been trading for
The level of HMRC and VAT Debt
The percentage of HMRC / VAT debt against other debts
Directors Loans
Bounce Back Loan misuse

What happens if I’m a sole trader and I can’t repay the Bounce Back Loan? Will I be personally liable?

Bounce Back Loan fraud is when the loan was intentionally used for other purposes and not for the benefit of the business. Refer to our dedicated page on Bounce Back Loans for more information

Explore more

Bounce Back Loan Help
Close a Limited Company
Help with HMRC Pressure
Overdrawn Directors Loan Guidance
Business Restructuring

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First name *

Last name *

Email *

Phone number *

Company name *

Is the business a Ltd company? *

Yes
No

Have you taken a Bounce Back Loan? *

Yes
No

Does the business have VAT/HMRC arrears? *

Yes
No

What is the total amount of debt? *

When is the best time to call you? *

How did you hear about us?

Message

Consent for storing submitted data *

I understand how my data will be used

Recaptcha *

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