Director - personal spends on Credit Card

S

Spudney

Registered User
Messages
20
Hi

Im just wondering if its at all legal for a company director to take out cash withdrawals from a company visa, spend for personal stays in hotels on a company visa and to book holiday flights on company visa is this illegal or is it easy to fight off in a court of law?

I know i need to seek legal adivse but generally is this legal?

Thanks
 
It's illegal unless the Director is repaying the company after using the card for personal use?

Otherwise he/she is taking money from the shareholders of the company. Income tax would also be due on any 'drawings'.
 
As QED says, unless the amounts taken are repaid, this should be treated as net salary & subject to PAYE / PRSI.
 
There is nothing unusual about this.

However, I have seen many companies used to finance the lifestyle of the directors and in the current economic climate companies need to keep this level of expenditure within the means of the company (from a cash flow point of view). The expenditure also needs to be accounted for as many directors to not recharge such personal expenditure to drawings!
 
jack2009 said:
There is nothing unusual about this.
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True, but it's bad practice. It contributes to a lax attitude that can get out of control. If there are employees who are not shareholders or directors, they might be tempted to follow a bad example. A dishonest employee might see exploitable weaknesses in the company's controls.


Yes, such practices can be dealt with by discipline in record-keeping and accounting. But why put anybody to the bother?

It looks to me as if Spudney might be concerned about expenditure that is not being tracked or reimbursed. That is clearly wrong.

In my opinion, this is a matter that should be referred to the board of directors, who should decide if the practice is to be permitted, set limits, and arrange for a suitable procedure for accounting for personal spending on a company card.
 

It depends on the circumstances

1st if the director has a directors loan account ie he put money into the company orginally and is now taking money out of the company via a credit card then it is not illegal.

2nd if the director is using the credit card for his own personal use it depends on what way this is being treated and it its being clasify as income then there is nothing wrong with it, or if he repays the company the money there is nothing wrong with it
 
im nearly certain there are no records of the personal speeds he does have a director loan account but if he spends say 700 on personal flights im certain this isnt in the books?
 
it depends on the circumstances of the transaction and what way it was treated in the accounts before you decide on what course of action you can do,

did he invest money into the company and is using the credit card to take back the money he invested ?

if he didnt invest money into the company and is using the credit card to finance his lifestyle is it being clasify as income to the director or is the director repaying back the loan ?

you need to know these answers before you know what course of action you and take and if the answer to the above is yes yes and yes then he is doing nothing wrong and nothing be done about it.
 
if the director spent 700 on personal flights on the credit card this has to be accounted in the books of accounts as if the credit card bill was say 1000 and 700 was for personal use and 300 for business use the company would pay 1000 to the credit card company so that is recorded its just what way is it recorded
 
Spudney said:
so can i do anything about it?
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If you are a director or shareholder, you can request that the matter be referred to the board. If you are an employee dealing with the company's finances, you can ask that such payments be authorised at an appropriate level and you can draw the auditor's attention to the practice.
 
thanks guys yes he did invest money about 8 times more than me and another person bout 80 : 20 but we dont have credit cards and have never spent for personal items with a company credit card
 
You don't make it clear if you are a director or not. If you are, ask that the matter be brought up at a board meeting.

The company auditor has a duty to you in your capacity as a shareholder. Bring your concerns to the auditor's attention.
 
If the spending was definatly for personal use, than you should question the person about it. If they needed to book hotels and flights for work use, then this wouldnt be personal use and would be allowed.
 
this particular director invested money into the company was this by way of a loan or via shares if its the former then he can take it out and is doing so by using the credit card,
and the auditor has a duty to companies members as a body in accordance with the requirements of the Companies Acts 1963 to 2006....
 
Ants09 said:
this particular director invested money into the company was this by way of a loan or via shares if its the former then he can take it out and is doing so by using the credit card,
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Only if the procedures are agreed and the transactions are properly recorded.

and the auditor has a duty to companies members as a body in accordance with the requirements of the Companies Acts 1963 to 2006....
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That includes all shareholders, not a subset of them.
 
at the end of the day if the director has a loan account and is using the company's visa account to take money out of his or her loan account they are quite entitle to do so.

if the transactions aint propertly recored then you are talking about fraud and error and that can be a dangerous road to go down. and we have no reason to beleive that the transactions aint recorded propertly
 
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