Insolvency is a complex and difficult situation for businesses, its employees and stakeholders. When a company is placed into liquidation or administration there are a number of claims that can be brought against the directors of the company in a personal capacity. One of these claims surrounds overdrawn director loan accounts. We, at Bennett Oakley, have been successful in defending these claims and settling them on favourable terms for our clients.
A director’s loan account is essentially money taken from the company account that is not a salary, dividend, expense payment or loan repayment made to a director. In practice company bank accounts are used for a wide range of payments that are personal to the directors. As soon as a personal payment is made it forms part of the director’s loan account and should be declared in the company accounts.
Difficulties can arise in circumstances where a company has entered liquidation or administration and there is a director’s loan account that is overdrawn and outstanding. It is often the case that the liquidator or administrator will attempt to recover the value of the loan account from the director in a personal capacity as it is an asset that is owed to the company. This is often a particularly stressful time for directors as, in addition to dealing with an insolvency situation, they have the added stress and pressure of dealing with a potential claim against them.
There are options available to directors to defend a claim and mitigate any personal liability in relation to a director’s loan account. The options available will depend upon the circumstances of each case and the allegations made by the claimant. We have experience in defending these claims and securing favourable settlements for our clients. **Due to the complex nature of these claims and the potential, personal, consequences we strongly advise anyone facing a claim to seek expert advice. **
Please contact a member of our team for an initial consultation and discussion as to how we can assist.
