Overdrawn Directors Loan Account for liquidated company

livewire82

I'm not sure if this is the correct section to post this on, but it was the closest one I could find.

Here's my situation...

Up until last year, I was 1 of 2 directors of a small business. I was also a 50% shareholder. In July, I resigned following financial issues within the business and as a result, it led to my directors loan account being overdrawn (by a 5 figure sum of money). The other director (who had a similar amount of debt in their DLA plus some additional borrowing attached to the business) continued with the business for a period but has now decided to dissolve the business.

Upon hearing this, I was quite surprised as to my understanding, when dissolving a company, an insolvency practitioner will take on the company debt and with the business no longer in operation, that debt becomes the responsibility of the individual. Furthermore, you are given 9 months to clear it or end up with a hefty tax bill. So the fact the other director has an even greater amount to clear than me and has chosen to do this rather than just keep the company active and just walk away from operations seems a bit bizarre. Can anyone see any logic behind this decision?

The issue is that this person is making things very difficult when it comes to communication. My resignation wasn't taken very well and ever since then, it's proven very difficult to get any info out of them.

I'm obviously really concerned about this as there's no way i'll be able to get any where near clearing this within 9 months. I have a mortgage, 2 children and already have about £20k worth of personal debt that I'm focused on paying off. So I'm looking for advice as to what my options are. 
All I've been told via email is the company will be dissolved and an insolvency practitioner will be in touch with me to discuss arrangements for paying back the overdrawn amount. I have no idea when and I have no idea where I stand with it all.
Am I definitely restricted to 9 months to pay it back? Is releasing equity from my home to pay it off an option?

kazwookie

https://www.gov.uk/directors-loans/you-owe-your-company-money

https://www.gov.uk/government/publications/fact-sheet-directors-loan-accounts/fact-sheet-directors-loan-accounts#if-your-company-is-liquidated

If your company is subject to any liquidation proceedings, a Liquidator can take legal action against you to collect any money you owe to the company, in order to repay the company’s creditors. If you cannot afford to repay this money you may be at risk of bankruptcy.

superbigal

An insolvent company should not be trading. Maybe he has had no choice but to cease operations.

MattMattMattUK

livewire82 said:

I'm not sure if this is the correct section to post this on, but it was the closest one I could find.

Here's my situation...

Up until last year, I was 1 of 2 directors of a small business. I was also a 50% shareholder. In July, I resigned following financial issues within the business and as a result, it led to my directors loan account being overdrawn (by a 5 figure sum of money). The other director (who had a similar amount of debt in their DLA plus some additional borrowing attached to the business) continued with the business for a period but has now decided to dissolve the business.

Upon hearing this, I was quite surprised as to my understanding, when dissolving a company, an insolvency practitioner will take on the company debt and with the business no longer in operation, that debt becomes the responsibility of the individual. Furthermore, you are given 9 months to clear it or end up with a hefty tax bill. So the fact the other director has an even greater amount to clear than me and has chosen to do this rather than just keep the company active and just walk away from operations seems a bit bizarre. Can anyone see any logic behind this decision?

The issue is that this person is making things very difficult when it comes to communication. My resignation wasn't taken very well and ever since then, it's proven very difficult to get any info out of them.

I'm obviously really concerned about this as there's no way i'll be able to get any where near clearing this within 9 months. I have a mortgage, 2 children and already have about £20k worth of personal debt that I'm focused on paying off. So I'm looking for advice as to what my options are. 
All I've been told via email is the company will be dissolved and an insolvency practitioner will be in touch with me to discuss arrangements for paying back the overdrawn amount. I have no idea when and I have no idea where I stand with it all.
Am I definitely restricted to 9 months to pay it back? Is releasing equity from my home to pay it off an option?

In theory it is repayable immediately, the nine month rule applies to a director's loan which is not converted to a dividend and then becomes taxable, there is no nine months to repay when a company becomes insolvent and is liquidated.
It may be, if your bank is willing to allow you to remortgage for the amount required, otherwise the liquidator is required to take legal action to recovered the amount owed, court, CCJ, enforcement of CCJ.