1 Mins
A liquidator has a duty to investigate the affairs of every company they are appointed to. Of particular interest are payments to directors. This is the fifth in a series of articles that look at the different types of payments that may be made to directors and what a liquidator will investigate. This article looks at the business and personal expenses.
Where a director makes a payment personally in respect of business expenses, they are entitled to be repaid these amounts. Proper records should be kept demonstrating that the expenses were wholly and exclusively for business purposes. When a company is experiencing cashflow difficulties, directors will often meet more of the company expenses personally. Records should still be kept, and the director should be careful not to prioritise the repayment of expenses to them over the amounts due to any other creditors.
A director has the responsibility to keep proper records. If the purpose of the payment cannot be supported by documentary evidence, the presumption is that the director did use these funds for personal purposes and should be repaid to the company.
If a director is using company funds to pay for personal expenses, then these amounts should be allocated to the directors’ loan account. If overdrawn, an insolvency practitioner will require that the balance is repaid.