It is very often the case that when directors of an insolvent company come to us for initial advice on the options available, the fact that there is an overdrawn director loan account is disclosed. Loans v Remuneration When businesses are in distress, directors frequently take loans from the company rather than salary or bonuses because of the need to pay tax and national insurance to HM Revenue & Customs on such remuneration. Given the financial and cash-flow pressures most companies experience in the run-up to a formal insolvency procedure, such a course of action is understandable, but does lead to uncomfortable conversations with directors. The overdraw DLA represents an asset of the company, a debtor which a liquidator, administrator, supervisor of a Company Voluntary Arrangement , will seek to recover. The problems faced by a director with an overdrawn DLA of over £10,000 are further compounded by the fact…
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