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Understanding directors' liability for company debts

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Updated: 5th February 2020

RBR Video - Liability for debts for company directors

Overdrawn Director Loan Accounts are a common feature of corporate insolvency and a major cause for concern among directors under any such circumstances. Real Business Rescue offers industry-leading corporate insolvency expertise and our specialist advisors can help you navigate the issues and find a positive route forward whatever your situation may be. Click the video below for an overview on the subject of overdrawn loan accounts. 

 

Video Transcription

In most of the enquiries we receive from directors of companies in financial distress, they face the problem of an overdrawn directors’ loan account – also referred to as an overdrawn DLA.  When you consider that, on average, over 70% of all directors in the UK have an overdrawn director’s loan account at some point or another it is considered to be a large problem.

Having an overdrawn director's loan account can lead to complex and potentially serious tax consequences particularly if a company becomes insolvent. This can have personal implications for a director if it is not addressed properly as an insolvency practitioner would be obliged to pursue the outstanding balance as it would be considered an asset of the company.

A liquidator will generally demand that the director repays the amount owed in order to pay the company’s creditors - and can take legal action to enforce this, which may lead to the pursuit of personally owned assets, or even bankruptcy.

So if you or fellow directors have an overdrawn DLA in a company that is under real pressure then speak to us as soon as possible. We can arrange a free confidential consultation in your local area with an experienced insolvency practitioner.

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