Overdrawn Director Loan Accounts
Director loan accounts (DLAs) are a frequent focus in CVLs and can give rise to personal exposure if not understood early.
At Keywood Group, we prioritise early clarity so directors know exactly where they stand.
What Is an Overdrawn DLA?
An overdrawn balance arises where a director has withdrawn more funds than they have introduced or earned (salary/dividends). In insolvency, this balance is treated as an asset of the company.
How It Is Dealt With in a CVL
- The liquidator will review the account history
- The balance is typically recoverable from the director
- Repayment terms may be discussed, depending on circumstances
Key Risk Areas
- Reclassifying drawings incorrectly as dividends
- Poor records or missing ledgers
- Increasing the balance shortly before liquidation
Practical Steps for Directors
- Review your DLA position before formal steps are taken
- Avoid further drawings where the position is unclear
- Gather supporting documentation (accounts, board minutes)
- Take advice on settlement options where balances are material
Final Thought
Early visibility of a DLA position allows for planning and avoids surprises. With the right guidance, outcomes can often be managed pragmatically.
Keywood Group
Licensed Insolvency Practice
📞 Contact us for confidential advice today on 0121 201 0399 or by emailing us at info@keywoodgroup.co.uk
