Have You Been Told To Repay Your Dividends?

Defending Overdrawn Director’s Loan Account ClaimsBeing told you need to pay back dividends from your company can be worrying and confusing. Particularly when you’ve followed advice to liquidate your company but only afterwards did anyone say you personally owe thousands of pounds.

That’s why it’s crucial to get expert legal advice now. So you have clarity about your legal and financial position, before you do anything that might jeopardise your options.

By getting early legal advice from a lawyer who specialises in defending overdrawn director’s loan account claims, you’ll give yourself the best chance of fighting your corner. And escaping the risk of personal bankruptcy.

“How Can I Owe Any Money Under A Director’s Loan Account When I Haven’t Taken A Company Loan?”

If you’ve always drawn an income through a mix of PAYE salary and dividends, it can come as a shock to hear that you may have to repay some of your earnings.

What’s changed? Why does it suddenly seem like you’re personally liable for the company’s debts?

Every director’s situation is different, however, and it’s important to explore the underlying circumstances in full. That’s why you need the right advice for your own situation. But it helps knowing where the liquidator or Official Receiver is coming from.

The key thing to understand is this.

It’s perfectly acceptable for shareholder directors to take dividends from profit. But only if there are enough funds available after the company has paid all its debts.

If at the end of the year the business accounts show that the company cannot pay all of its debts, questions will be asked. Did the company have sufficient profits to make those dividend payments when it did?

So if your company enters into an insolvency situation, the administrator or liquidator will look closely at any sums you were paid. They will compare them with the debts your company owed its creditors – checking whether it had made enough profit to pay dividends. Any amount you received over and above what the company had in profit will be treated retrospectively as a director’s loan. Not dividends.

What You Need To Know About Overdrawn Director’s Loan Accounts

When your business enters insolvency, you might think it can write off a loan you owe. After all, isn’t there supposed to be legal separation between you and the company?

Unfortunately, that’s not the case. The liquidator or administrator will expect you to repay the money, regardless of your personal financial circumstances. That’s because you’re seen as a debtor who owns money to the company, just like any other debtor. It doesn’t matter that you have provided services to your company.

They will pursue a claim against you through the courts if necessary, which could put your assets in danger. And put you personally at risk of bankruptcy.

Sadly, the potential repercussions don’t stop there. You could face disqualification as a director for 2–15 years. And if any illegal activity comes out, you could be looking at a criminal prosecution. Not to mention a possible prison sentence.

That’s why it’s vital to get expert legal advice as early as possible.

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“Altion Law were very professional and their advice was invaluable.”
A client we helped

An Experienced Lawyer Who Stays On Your Side

When clients first come to us for independent advice, their company has often already been working with an insolvency firm. As directors, they may have followed advice to liquidate the company.

So it then comes as a big shock to receive a letter from the same insolvency firm (or solicitors on their behalf) saying you now need to pay back thousands of pounds. You thought they were on your side. Now, they most definitely are not.

We understand you might feel you would have done things differently. Especially if you’d known a claim was on the cards.

But your focus must be on the present. And you need to understand what you’re up against.

That’s why it’s essential to get your own expert advice as soon as possible from a lawyer who:

  • sees the bigger picture
  • is prepared to fight your corner
  • knows how to negotiate with the Insolvency Service
  • and can help you put the right strategy in place for your circumstances.

Working closely with you and your accountant, we’ll question each payment. We’ll look to understand whether it needs to be repaid or whether it can properly be described as expenses.

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“I cannot be thankful enough to Rebecca and Altion Law for the service and help I received, through a very difficult time.”
A client we helped

Take Action Today With A No-Obligation Call

Why not get the ball rolling today? Call us on 01908 414990 for a confidential discussion of your situation.

Not only is your first call free but in many cases we’re able to offer our clients an initial fixed-fee service. And where possible, we aim to help you save money. We’ll suggest things you can do yourself or your accountant can do for you.

Keeping Things Confidential

We understand how difficult it can be when you’re suddenly told you need to repay your dividends.

And we understand you might not have told your spouse or significant other about what’s going on. So if you want to make sure there’s no one else around when we speak, we’ll call you back. At a time that suits you.

Arrange a good time for a call

Start Putting The Right Strategy In Place

Let us help you. We’re based in Milton Keynes but we can act for you wherever you are in England or Wales.

Don’t hesitate. Contact us today to discuss your situation. And the next steps for putting the right legal and commercial strategy in place.

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