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Time Out! The MP Blog

Welcome to the Marshall Peters Blog. Here you will find useful articles on a variety of finance related topics. Enjoy!

Directors’ Loan Accounts

A directors’ loan account (DLA) can become a very serious issue to any director where their company is in financial difficulties.

Should the company owe a director an amount of money and the director know or should know that the company is insolvent they should not discharge themselves or declare a further dividend (should the director be a shareholder) with a view to recovering any monies due to them. This will be conceived as a preference and would be pursued by any insolvency practitioner upon appointment.

On the other hand should there be a credit balance, that is money drawn by a director and outstanding to the company at any subsequent year end or on insolvency an insolvency practitioner will seek to recover in full for the benefit of it’s creditors. An overdrawn DLA can be a very serious concern to a director when their company is in financial difficulties.

 

 

It is common place for a director to withdraw money from the company and at the year end declare a dividend against the profits. Unfortunately, when a company hits financial difficulties it will be sustaining losses and not making profits therefore a director cannot declare a dividend and moneys withdrawn will be caught under their DLA.

Many insolvency practitioners are aware of this when quoting directors in respect to fees for assisting them with the formalities of placing a company into formal insolvency proceedings. This will not prevent them from attempting to recover any overdrawn DLA in full.

Should you be a director of a company encountering cash flow problems or any other form of financial distress contact one of our friendly team for  free confidential advice on the options available to you.

Do not make further advances to yourself should you have a DLA with a credit balance furthermore if your DLA is overdrawn we may be able to assist you to reduce the balance accordingly.

 

Fall in Personal Insolvencies
Tax

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Saturday, 16 December 2017