What's a directors loan account?

Many directors and shareholders have made loans to their companies. These will be shown in the company accounts as the directors’ loan account. It could be made up of loans made by the director or as a result of dividends or remuneration that hasn’t been drawn out of the company.

If the director died or became critically ill, the loan would need to be repaid. But, the company may not have the money available to repay the loan. Therefore, the directors loan account should be covered to protect the company, the director and the director’s estate.