Director salaries: Payments to directors & company insolvency

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 fourth 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 salaries.

A director’s salary/wages are paid to a director under an employment contract and processed through the company’s payroll scheme.

A liquidator may ask to see the contract of employment and will confirm that the PAYE and NIC contributors were deducted from any salary. If this was not the case, then the liquidator may treat the payments as increasing a director loan balance.

If salary payments were excessive the Liquidator may seek to challenge these. This may also lead to a director being disqualified by the Insolvency Service.

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