Before closing a company with a director-loan balance, establish who owes whom and why. A loan from a director to the company differs from money the director owes the company.
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Do not clear the balance with an unexplained journal simply because the business is ending.
Reconstruct the loan
Collect advances, repayments, agreements, interest terms and expense claims. Reconcile them to bank records and the ledger.
Confirm the actual creditor or debtor. Amounts attributed to a director may involve another shareholder, related entity or incorrectly classified transaction.
Example: the company cannot repay the founder
The founder says to “forget the amount”. Obtain advice on whether a genuine waiver is intended and how it should be documented. An accountant reducing the balance does not, by itself, establish a legally effective release.
Separate possible actions
- Repayment of a verified amount.
- An actual release on documented terms.
- A disputed or unsupported balance requiring investigation.
- A different closure route where obligations remain.
Consider other creditors and the company’s ability to meet its obligations. A payment to a director can require particular care where the company is financially distressed.
Review the consequences before posting entries
Ask tax and accounting advisers about the actual settlement or waiver. Do not assume every released loan is tax-free or that its accounting treatment is identical in all circumstances.
If the director owes the company, consider the company’s asset and recovery position. An unrecovered receivable should not be ignored when assessing closure.
Check the final eligibility and evidence
Review ACRA’s strike-off criteria against the resulting facts. Record the legal transaction, approved accounting entries and actual payments or releases.
Keep the supporting documents with the final closure file. If assets or liabilities remain, obtain advice on the appropriate next step rather than making an inaccurate declaration.
Can a director-loan account be zeroed automatically?
No. Establish the actual settlement and proper treatment.
Are amounts due from and due to a director interchangeable?
No. Identify the direction and underlying transaction.
Related company closure resources
See our shareholder loan review, filing history checklist and continuing guarantee guidance.
Get help with company closure
Email [email protected] or WhatsApp +65 8501 7133. We provide corporate secretarial and accounting support, with tax advisers to review outstanding tax matters. Legal advisers from our associated law firms can assist with creditors, closure disputes, restoration and winding-up questions.