Directors of limited companies often use directors' loan accounts to move money between themselves and the company. What happens during insolvency?

If the company owes the director money, the director is an unsecured creditor. It’s crucial not to repay themselves ahead of others to avoid unfair preference. Conversely, if the director owes money to the company, the loan account is considered an asset, and the insolvency practitioner will seek repayment.

Unpaid wages, notice pay, or redundancy will offset against the director’s debt to the company. Offers will be assessed based on repayment length, lump sum or monthly payments, and the director’s personal assets.

For concerns about directors' loan accounts and insolvency, contact us for a free, no-obligation discussion.

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