As you are no doubt aware Directors loans under the Companies Act 1990 were illegal when they exceeded 10% of the net relevant assets of the company. The effect of this being that when a company had an auditor in place, the auditor was required to submit an indictable offences report to the ODCE.

The New Companies Act

Under the new Companies Act (commencement estimated 1 June 2015) it will be possible to legalise the directors’ loans using a summary approval procedure. Being able to legalise the loan to directors should remove the reporting requirement to the ODCE. However it should be borne in mind that under the new act, the existence of a legal director’s loan will expose all directors to unlimited personal liability for the debts of the company. It is worth noting that BIK and income tax will still have to be paid on these loans.

Before Taking The Plunge

Therefore, before taking the plunge to legalise Directors loans, the directors should carefully consider the fact that they are exposing themselves to unlimited liability. Consequently we would recommend that independent professional advice be obtained before undertaking any action.

What Questions Do You Have?

We are happy to help. Please post your comment below or call Des McCann, Partner at Cooney Carey, on 01 677 9000. Alternatively, send him an email: dmccann@cooneycarey.ie

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