directors loan

clare1972

Hi - I've just (ie yesterday) resigned from a small not-for-profit business. I've requested repayment of my director's loan of £4200. I've been informed that it won't be repaid because of the not-for-profit nature of the business. I've posted the specific point in our articles and memorandum referred to in their response. I find it hard to accept as the loan was accrued over a long period of time (from organisational income exceeded our wages) with the idea that it would occasionally be paid to directors as finances allowed. We have received one such payment in the past. Any idea of whether their argument holds water?

Article point 5
The income and capital of the organisation shall be applied solely towards the promotion of the objects of the organisation; and no part of the income or capital shall be paid or transferred, directly or indirectly, to the members of the organisation, whether by way of dividends or bonus or otherwise in the form of profit.

Mistral001

So you have loaned the organisation £4200 and now that you are leaving you want it back. Is that right?

paddyrg

I imagine it's in the form of expenses/stock bought/cashflow if it has accrued over time - I don't think not for profit organisations have any special right not to pay their bills. It's not their money you're asking for, it's yours (so that memorandum and articles point is a red herring). If the company isn't viable, it's somewhat their lookout. They shouldn't even have recognized the loans as anything other than liabilities in their accounting to be honest.

Wywth

clare1972 wrote: »

Hi - I've just (ie yesterday) resigned from a small not-for-profit business. I've requested repayment of my director's loan of £4200. I've been informed that it won't be repaid because of the not-for-profit nature of the business. I've posted the specific point in our articles and memorandum referred to in their response. I find it hard to accept as the loan was accrued over a long period of time (from organisational income exceeded our wages) with the idea that it would occasionally be paid to directors as finances allowed. We have received one such payment in the past. Any idea of whether their argument holds water?

Article point 5
The income and capital of the organisation shall be applied solely towards the promotion of the objects of the organisation; and no part of the income or capital shall be paid or transferred, directly or indirectly, to the members of the organisation, whether by way of dividends or bonus or otherwise in the form of profit.

A loan is not income or capital. It is a loan, to be repaid in accordance with the agreed terms of such loan. You did agree terms didn't you?

An "idea" is not really an agreement, and even if it were, "it would occasionally be paid to directors as finances allowed" is loose enough for the proverbial horse and coaches to ensure it never is repaid. :cool: