UK Directors Loan A/c after a director has died

[Pam Goldie]

Hi, can anyone help me, i'm assisting a friend with some books, he's very ill and his father passed away, his dad was a director and had a loan account in credit to the company, what happens to this account once he has passed away, does it get written off?
Thank you

 

[Fidget]

It depends really. If there's a formal loan agreement or something general in the company's articles of association that sets out what should happen in those circumstances, then proceed as per that, or it might be that it's covered by insurance.

In the absence of any of that, then its up to the company how to proceed. It could try to recover the balance from the deceased's estate, or could choose to write it off.

 

[Pam Goldie]

Thank you, it belonged to the owners father and if it can be written off i think that'd be his choice as there was no funds in the will or estate to pay it off. thank you for replying, very much appreciated Fidget :-D

 

[Fidget]

You're welcome.

Just something to be aware of is that the outstanding balance is owed to the business, rather than to the surviving son, so if writing the balance off affects ability to pay other creditors of the business, then there could be other implications of that.