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0113 246 1234

What are the risks of directors’ loans?

On paper, a director’s loan looks like an easy way to access company funds, but it comes with serious responsibilities.

This is money taken from your company that is not salary, dividends, expenses, or a repayment of what you have previously put in.

Every transaction must be recorded in a Director’s Loan Account (DLA) and repaid within the required timeframe.

Fail to handle it correctly, and you could face financial penalties, tax complications, or even legal action.

If you have taken out a director’s loan, here is what you need to be aware of:

Tax traps and financial penalties

Legal and reputational risks

Repeatedly overdrawing your Director’s Loan Account can harm your company’s financial credibility.

Worse still, if you mismanage company funds or use them inappropriately, you could breach your fiduciary duties as a director.

If your actions result in financial loss for the company, you could be held personally liable and required to compensate the business.

How to stay compliant

To avoid trouble, make sure you:

Directors’ loans can be useful, but they are not without risk.

If you need expert guidance on managing them properly, contact our team today.

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