Can a liquidator make you repay your director’s loan account? Yes, and a liquidator will almost always try. An overdrawn director’s loan account is money you owe your company, and once the company is in liquidation that debt is often one of the few assets left for the creditors (usually HMRC, in a small company). A High Court judgment handed down today shows what happens when the director’s answer to every question is “ask my accountant”.
The case is Hinton v Stobinski [2026] EWHC 2386 (Ch), a first instance decision of Deputy ICC Judge Curl KC. The liquidator recovered £190,153.99, with interest and costs still to be argued. None of the law is new, but it’s a very clear example of how a lot of owner-managers run their companies, and why that stops working once the company can’t pay its tax.
A service company, a loan account and a growing tax bill
Dr Stobinski, a doctor, was the sole director and shareholder of a company that was mainly a service company for some of his medical work. It went into creditors’ voluntary liquidation in 2022 owing around £79,000 in corporation tax, with almost no books and records beyond filed accounts and bank statements.
The liquidator claimed three things: £112,506 shown as “other debtors” in the last accounts, which he said was the director’s loan account; about £63,000 of unexplained payments (Amazon, eBay, PayPal, auctioneers, a fair amount of pub and restaurant spending); and £38,500 paid to Dr Stobinski himself and labelled “MGMT CHARGE” on the bank statements.
“HMRC’s figure” turned out to be his own
The main defence to the loan account claim was that £112,506 was “HMRC’s DLA figure”, produced by a tax compliance check that led to the accounts being amended in 2022.
The judge found the opposite. The amended accounts were prepared by the company’s own accountants and approved by Dr Stobinski, and HMRC’s figures matched them to the pound. Section 455 tax (the charge on a close company that lends to its director) had been calculated on that balance without challenge. The explanations then moved around: lost investments, a dividend declared during the HMRC investigation, unclaimed expenses, and a claim that he’d actually lent the company £98,960. The bank statements showed no such loan, and some of the “expenses” he said he’d paid personally had been paid by the company. All of it was rejected.
I have some sympathy with a director who doesn’t understand their own accounts (I don’t read every line of mine with total attention either). But if you sign accounts showing you owe the company £112,506, and your accountant tells HMRC the same, it’s very hard to say later that the number was someone else’s.
“Ask my accountant” is not a defence
Dr Stobinski’s position, in the witness box and throughout the liquidation, was that questions about the company were for his accountant. He’d refused to speak to the liquidator’s staff and told them it was unprofessional to call him.
The judge said that was obviously wrong. A director isn’t expected to be an accountant, but they are expected to know why they caused the company to pay something or not pay something, and they stay responsible even when relying on advice. He didn’t find Dr Stobinski dishonest; his finding was that Dr Stobinski didn’t really understand that a company has interests separate from his own. That didn’t help. Because he’d never considered the company’s interests at all, his decisions were judged against what a reasonable director would have done.
Once the company is near insolvency, creditors come first
Under the Supreme Court’s decision in BTI 2014 LLC v Sequana SA [2022] UKSC 25, directors of a company that is insolvent or close to it must give proper weight to creditors’ interests. This company was at least bordering on insolvency from December 2019: about £1,200 in the bank, years of unpaid corporation tax, and a balance sheet that only looked solvent if you treated the director’s own loan account as collectable.
From then on, the judge said, any decision benefiting Dr Stobinski personally had to give creditors “paramount or near-paramount” weight. A reasonable director would have stopped drawing on the loan account and repaid enough to cover the tax. He kept drawing, which was a breach of section 172 and section 175 of the Companies Act 2006, and he was liable for the full £112,506. The unexplained payments were breaches too, although the judge cut that head to £39,147.99 to avoid double counting with the loan account (and said he did so “with some regret”).
Even lawful dividends can be the wrong thing to pay
At trial it was argued that the £38,500 was part of dividends recorded in the accounts, even though Dr Stobinski’s own witness statement said it was salary. The judge didn’t accept that, but said it wouldn’t have mattered anyway. A dividend that could not be paid (no distributable profits, formalities not followed) is different from one that should not be paid because paying it breaches the director’s duties. Taking money out of a company that couldn’t pay its tax was the second kind, whatever the paperwork said.
This is the point I think most owner-managers miss. If the accountant has done the dividend paperwork and the company is solvent, you’re generally fine. If it isn’t solvent, the paperwork doesn’t protect you.
What to do now
If your company is struggling to pay what it owes (HMRC included), stop drawing on the loan account and think about repaying it rather than clearing it with a dividend. Know what your accounts say you owe, because you’ll be held to that figure. Keep invoices, board minutes and dividend paperwork, even in a one-person company; here the lack of records meant the court filled the gaps against the director. And if a liquidator gets in touch, engage with them, hand over what you have and take advice early; my colleagues who deal with insolvency can help if it gets that far.
If you’re planning to sell, sort the loan account out before a buyer’s due diligence finds it, because on a share sale it will usually have to be dealt with in the share purchase agreement.
I advise directors and shareholders of owner-managed companies on company law issues like this, and help business owners get ready to sell. Get in touch if you need some help.
Written by Steven Mather, a business solicitor acting on company sales and purchases. This is general information about the law, not legal advice on your situation.
Written by Steven Mather, a business solicitor acting on company sales and purchases. This is general information about the law, not legal advice on your situation.
