All Directors would be advised that formal written agreements be put in place for all directors’ loans, as the new Companies Act 2014 will adversely compromise informal directors’ loans.
Directors’ loans when they exceeded 10% of net assets are illegal under the Companies Act 1990. Under the new Companies Act 2014 (after June 2015) it will be possible to legalise directors’ loans using a summary approval procedure. The income tax and benefit-in-kind will have to be paid, but the loans will be legal. However, under the new Act, the existence of a legal debit directors’ loan may expose the directors to unlimited personal liability for the debts of the company.
In addition for credit directors loans, formal paperwork will need to be put in place by 1st June 2015 or the loan may end up by default to be consigned as equity.
If you have a directors’ loan debit or credit seek advice now. Brian Dignam is a Director in OSK. Contact OSK for all your accounting and tax queries on 01 439 4200.
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