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Looking to liquidate your business? For help call 0300 303 8284
Looking to liquidate your business?
For help call 0300 303 8284

What is a Directors’ Loan Account?

A directors’ loan account (DLA) is a notional balance owed between directors and the company. It is used to record money injected into and taken from a business by the directors.
DLAs are perfectly legal and there are no issues taking one out (although it needs to be approved by shareholders if it is over £10,000). However, it needs to be repaid or offset within nine months of your company’s financial year end, or it is seen to be overdue and judged as an interest-free loan from the business, with tax implications.

Is my Directors’ Loan Account in debit or credit? What next?

If the business owes you more than you owe it, your DLA is known as ‘in credit’. Conversely, if you owe the business more than you owe it, the DLA shows as a debit balance (it is overdrawn).

Things get a bit more complicated when the business is viewed to be insolvent and the DLA is overdrawn. This is deemed to be an asset of the business, and a appointed insolvency practitioner will look to try to recover that money to help pay off creditors. There is a chance that the loan will be written off if it’s judged to be irrecoverable, but in most cases it some or all of it will need to be repaid.

If you have any concerns about Directors’ Loan Accounts or you need advice on repayment if your business is now insolvent, call The Insolvency Experts friendly and professional team, who are ready to help.

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Directors’ Loan Accounts
michael beal