What Happens When I Owe Money to My Own Company?

It is not uncommon for directors or shareholders to owe money to their own company. This situation often arises through director’s loans, drawings taken in excess of salary or dividends, or business expenses that were never properly reimbursed. While this may seem manageable when a company is trading normally, it can become a serious issue if the business faces financial difficulty or enters liquidation.

Understanding what happens when you owe money to your own company is essential, particularly if insolvency is a possibility. The way this debt is treated can have significant legal and financial consequences for directors.

This article explains how director debts arise, how they are treated in liquidation, and what directors should be aware of under UK insolvency law.

Directors often underestimate how seriously director loans are treated in liquidation. What may have seemed like an informal arrangement while trading can quickly become a formal debt with legal consequences.


Addressing director loans early, keeping proper records, and understanding your obligations can reduce risk and stress later on.

Simple Liquidation was designed to provide directors with a clear and straightforward route through liquidation. Their Insolvency Practitioners are authorised by the Insolvency Practitioners Association and the Institute of Chartered Accountants in England and Wales.

Jamie Playford FABRP MIPA and Alex Dunton MABRP are licensed Insolvency Practitioners regulated by the ICAEW and are also members of R3, the Association of Business Recovery Professionals. With over 30 years of combined experience, they have dealt with hundreds of cases involving director loan accounts in both solvent and insolvent liquidations.

Owing money to your own company is more than an accounting technicality, especially when liquidation is involved. In insolvency, director loans are treated as company assets, and liquidators are legally required to pursue repayment for the benefit of creditors.

Whether the company is solvent or insolvent, director loans must be addressed properly. Understanding the implications early and seeking professional guidance can help directors manage the situation responsibly and avoid unnecessary personal consequences.

Handled correctly, even difficult financial issues like director loans can be resolved in a structured and compliant way.

Location: London, UK

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