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How Annecto Legal Assisted in an Overdrawn Director’s Loan Account case

How Annecto Legal Assisted in an Overdrawn Director’s Loan Account case

insolvency case

Overdrawn director’s loan accounts can have legal and financial implications for both the company and the director involved, potentially leading to tax consequences, regulatory issues, and strained relationships between stakeholders.

For insolvency practitioners (IPs) striving to ensure that unpaid creditors recover as much of their debt as possible, securing the correct funding for their case is essential. Insolvency practitioners prioritise weighing the balance between risk and reward, aiming to minimise potentially high legal expenses while maximising the recovery of valuable assets for the benefit of creditors.

Considering that cases involving overdrawn director’s loan accounts can involve significant costs, it is crucial to be thoroughly informed about funding options to ensure a cost-efficient approach to the case. At Annecto Legal, we recently assisted an insolvency practitioner in securing funding for a case valued at £62,000.

Overdrawn director’s loan account

Director’s loan accounts attract scrutiny from various parties as they differ from standard business account practices. This becomes particularly noticeable when an account becomes significantly overdrawn, especially among financial turmoil within the relevant company.

An overdrawn director’s loan account signifies a situation where a director withdraws more funds from a company than they have contributed, excluding dividends or salaries. These overdrawn sums are recorded as assets on the balance sheets of the involved companies until repayment is made. If these overdrawn sums are not repaid, the company may face legal action.


How Annecto Legal assisted on an overdrawn director’s loan account case


Annecto Legal was recently approached to broker a claim of £54,000 in relation to an overdrawn director’s loan account. The case was pre-issue, and the defendant was not particularly forthcoming. The insolvency practitioner had already approached one funder that is very well known in the insolvency sector.

However, they were concerned that accepting an offer without exploring the wider market would not serve in the creditor’s best interests. At Annecto Legal, we often receive a lot of enquiries like this, and we always try to secure comparative quotes.

As a result of this, insolvency practitioners are better informed about the options available to them and are then in a position to justify these options to creditors. In this case, we were able to secure three different quotes for the IP to choose from for this particular case.


Funding overdrawn director’s loan account cases


Insolvency practitioners involved in overdrawn director’s loan account cases can make use of the following funding options. 

After-the-event (ATE) legal insurance – ATE insurance is generally used to protect from adverse costs risks & security for costs requirements. After-the-event (ATE) legal expenses insurance is perhaps best thought as a similar to a ‘swap’. For either no upfront fee or a small upfront fee, the insurer takes on all of the risk of the potential adverse costs award. The claimant has swapped their obligation to pay the defendants in the event of a loss, with the obligation to pay the insurer in the event of a win.

This ‘swap’ is generally an attractive option as the client is likely to be in a better financial position following a win than following a loss. Also, the payment to the insurer will only be a percentage of the adverse costs rather than the whole amount.


Third party litigation funding – In some cases, third party litigation funders may be willing to provide funding for an overdrawn director’s loan account case in exchange for a percentage of any financial settlement or damages awarded. This option can be attractive for individuals who cannot afford to pay for legal fees themselves but have a strong case. ATE insurance is often used in conjunction with this type of funding.


How Annecto Legal assists insolvency practitioners


Annecto Legal offers valuable assistance in equipping insolvency practitioners with comprehensive insights into available funding options. Our professionals have extensive knowledge of the market, encompassing a diverse range of litigation funders and after-the-event (ATE) legal expenses insurers.

At Annecto Legal, we understand which funders and insurers are interested in what type of case and what on what terms. Most importantly, we can help to ensure informed choices are made and justified to the creditors. We can assess offers, explain differences, and provide a broader understanding of how funders and insurers work.

A further advantage is that IPs can access the service with no upfront costs, and their fees are often paid by the funders or insurers upon the successful conclusion of a case.

Regardless of the decision to proceed, the insolvency practitioner is now in a position to make well-informed choices and demonstrate diligent efforts to secure the best terms for their client.

Why choose Annecto Legal?

 At Annecto Legal, we assist a wide range of clients in finding the funding options for overdrawn director’s loan account cases.

Annecto Legal regularly assists licensed insolvency practitioners and liquidators who are involved in the administration or liquidation of a company, as well as trustees in bankruptcy. If you are in the process of pursuing or defending an overdrawn director’s loan account case and want to find out whether we can assist in helping you fulfil your obligations and secure the right deal, then contact Annecto Legal now.



Get in touch

* Annecto Legal can only assist on case where the loss is in excess of £100,000, with the exception of data breach claims. If you need assistance on a claim worth over £100,000, please get in touch using our form or the details below:

Registered Office

Annecto Legal Ltd, 106 Kennedy Building, Murray Street, Manchester , M4 6HS


0800 612 6587


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