Oliver Elliot

Can you write off an overdrawn Director’s Loan Account before insolvent Liquidation?

Nope.

If a director owes money back to the company, that debt is usually considered a company asset. Once a company enters Liquidation, the Liquidator has a duty to investigate and recover assets for creditors.

Trying to “write off” the loan shortly before Liquidation can raise serious red flags, including:
• Transactions at undervalue
• Misfeasance claims against directors

The detail matters.

The timing matters.

A Director’s Loan Account problem rarely disappears just because the company does.

What do you actually need to liquidate a company?

Most people think it starts with directors making the decision.

For a voluntary liquidation, shareholders need to pass a special resolution with at least 75% approval.

In other words: No 75% vote. No liquidation.

BusinessOwner UKBusiness DirectorsDuties

Wrongful trading in under 30 seconds.

If directors continue trading when they knew, or ought to have known, there was no reasonable prospect of avoiding insolvency, they can face personal consequences.

In simple terms: “Keeping going and hoping for the best” is not a legal defence.

The earlier directors take advice, the more options usually remain available.

UKBusiness DirectorDuties CorporateRecovery

“Is insolvent trading illegal?"
No, not without something more.

Great care (a good idea is to get professional advice) should be adopted when trading whilst insolvent because if directors continue trading when they knew, or should have known, the company could not avoid insolvency, things can become very serious and they can engage in unlawful actions as a result.

That can lead to accusations of wrongful trading.

Disclaimer:
This is not legal advice and is not to be relied upon as such. This is provided for information purposes only. You should take independent advice on the facts of your case. No liability is accepted for reliance upon this post.

Can I be prosecuted for wrongful trading?
Not really.

Wrongful trading is a civil issue, meaning the court can order directors to personally contribute towards company losses if they carried on trading when insolvency was unavoidable.

The important point is this:
Directors cannot simply shut their eyes, continue taking credit, and hope optimism repairs the balance sheet.

Once a company is insolvent, directors must consider and prioritise creditors’ interests.

But where dishonesty, fraud, fake invoices, or hidden assets appear, things can escalate from civil liability.

DirectorDuties CompanyLaw HMRC

“What do you mean the strike off has been suspended?”

An objection to striking off a company happens when someone tells Companies House the business should not be dissolved yet.

Usually because:
• Taxes are unpaid
• Creditors are owed money
• There are ongoing disputes
• HMRC has spotted something interesting

The most common objector is HMRC over unpaid tax.

A strike off is not a reset button. If there are unresolved liabilities, the company may need a more formal closure process instead.

Insolvency CompanyClosure EntrepreneurUK

No.

HMRC debts can potentially be dealt with through:
• Company Voluntary Arrangements
• Insolvency procedures such a Liquidation

The earlier you deal with HMRC, the more options usually exist.

Will HMRC investigate me if I go into liquidation?

Not necessarily.

Entering liquidation does not automatically mean HMRC thinks you need to be investigated.

But liquidators are required to review director conduct and report certain issues.

Things that can attract attention include:
• unpaid taxes with no clear explanation
• overdrawn director’s loan accounts
• tax avoidance schemes
• suspicious transactions
• Bounce Back Loan misuse
• preferring certain creditors over others

The problems may arise if people start treating the company bank account like a personal rewards programme.

CVL DirectorsDuties

The most essential ingredient for a voluntary liquidation?

A 75% shareholder vote in favour of it.

A company cannot usually enter voluntary liquidation just because one director says so.

The shareholders must pass a special resolution with at least 75% approval.

If your financial plan starts with “my mate reckons”, congratulations, you don’t have a plan.

Proper advice usually costs money. Bad advice costs penalties, interest, and the slow realisation that the pub is not a regulated advisory environment.