Best Accountants in Kirkcaldy

Directors of limited companies can loan money between themselves and the company using a director's loan account. What does this mean during an insolvency procedure? If the director is owed money by the company, then during the procedure they count as a creditor, so ranks alongside the other ordinary unsecured creditors in the process. However, they must not take preference towards themselves and pay themselves prior to other creditors as this can result in being pursued for repayment of the sum if challenged. If the director owes the company money the loan account is considered an asset of the company and the insolvency practitioner has an obligation to realise it. If the director was also an employee of the company and is due wages, notice pay or redundancy then these would be offset against the balance due to the company. The insolvency practitioner will review the books and records of the company to substantiate the total sum due and would seek repayment proposals from the director. If you have a director's loan account and would like advice concerning this topic then contact a member of our team.