What is an overdrawn directors current account? What happens to this loan in insolvency ?

16 June 2010

In more than 75% of our enquiries from directors of struggling SME companies, we find that this is a major problem. So what is an "overdrawn directors current account"?

Well, usually the company is making some profits and your accountants advise the directors to save tax by paying the directors a small salary and then you take dividends from the reserves of profits made in the past and current years. So off you go taking money out of the business as instructed.

Then something goes wrong!

Although the advice is generally sound from a tax reduction perspective, when a company is performing well; it’s when things go wrong that directors can end up with serious personal liability problems.

See the rest of the guide here...