Directors loan to company on death

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exercises2024

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Q: If a small business director lent funds to his company to provide cash flow and it is recorded as directors loan but is not seeking the repayment of this. What happens on death regarding this loan ? Can it be taken off the balance sheet and can it be excluded from the personal estate of the individual
 
To try and answer the OP, I expect that the Executor of the deceased's Will would be obliged to seek repayment of the loan from the company, so that the assets of the estate can be distributed to the beneficiaries.
 
It would seem a prudent thing to have done when the money was handed over
 
Thank you - no formal agreement but the wishes are not to chase and taken off the balance sheet on death
the executors and beneficiaries also wish to follow these wishes on death -
Thank you
 
jpd said:
It would seem a prudent thing to have done when the money was handed over
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Hardly when he handed it over to his own company,
exercises2024 said:
Thank you - no formal agreement but the wishes are not to chase and taken off the balance sheet on death
the executors and beneficiaries also wish to follow these wishes on death -
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On that basis, just write it off.
 
It may be his company, but it still a separate legal entity - we don't know if there were any other shareholders. Directors, even of their own company, have legal obligations to follow. Writing off the loan may have tax implications for the company
 
jpd said:
It may be his company, but it still a separate legal entity - we don't know if there were any other shareholders. Directors, even of their own company, have legal obligations to follow. Writing off the loan may have tax implications for the company
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And for the owners of the company in certain cases
 
It’s a circular transaction anyway, surely?

My company owes me €100 and I pop my clogs.

My assets include either:

a) €100 loan note plus (Company - €100), or

b) Company

The value of what’s being inherited stays the same.
 
Gordon Gekko said:
It’s a circular transaction anyway, surely?

My company owes me €100 and I pop my clogs.

My assets include either:

a) €100 loan note plus (Company - €100), or

b) Company

The value of what’s being inherited stays the same.
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On a net basis that could be the case but there could be different beneficiaries for the loan and the company
 
BigBoots82 said:
On a net basis that could be the case but there could be different beneficiaries for the loan and the company
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Based on the background facts, that’s very unlikely. There’s no loan agreement and it’s described as ‘his company’. On that basis, I can’t see how an undocumented loan could be allocated separately.
 
Gordon Gekko said:
Based on the background facts, that’s very unlikely. There’s no loan agreement and it’s described as ‘his company’. On that basis, I can’t see how an undocumented loan could be allocated separately.
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I dont disagree re probability. Making the point for the OPs benefit in case relevant. And just because there isn't a formal loan agreement doesn't mean there isn't a record of same. What about the company's accounts filed with the cro? A loan owed to a director is likely to have been a material disclosure.
 
Interesting question. All directors loans are recorded in the company accounts . I asked my accountant and was told to speak a tax advisor . I wanted to know how its affects business relief calculations . ie. company valuation minus directors loan then reduced by 90% etc. or company valuation reduced by 90% reduction and directors loan by 33%.
 
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