Directors Loans in Ireland: Rules, Tax, and Compliance
Directors’ loans — money lent by a company to one of its directors or vice versa — are subject to strict rules under the Companies Act 2014. Getting this wrong can have serious legal and tax consequences.
Company Lending to a Director
Under the Companies Act 2014, loans above 10% of the company’s net assets require prior approval by ordinary resolution of shareholders. Any loan must be disclosed in the company’s financial statements, and interest must generally be charged at a commercial rate to avoid a benefit-in-kind tax charge.
Director Lending to Their Company
A director may lend money to their own company. This is common in early-stage businesses. The loan should be properly documented with a written loan agreement covering the amount, interest rate, repayment terms, and what happens on the director’s death or departure.
Tax Implications
If the loan is interest-free or below-market rate from company to director, Revenue may treat the benefit as a notional loan triggering a benefit-in-kind charge. Interest paid by the company to the director is income subject to income tax. If a loan is written off, the amount is treated as director income subject to income tax, PRSI, and USC.
Disclosure Requirements
All loans to directors must be disclosed in the company’s annual financial statements under the Companies Act 2014, regardless of amount. Failure to disclose is a criminal offence.
Frequently Asked Questions
Can a director take money from a company account in Ireland?
Withdrawing company funds without a proper basis — salary, dividend, or documented loan — is a breach of fiduciary duties as a director and can constitute misappropriation. All payments to directors must have a valid legal basis.
Do directors loans need to be repaid?
Yes — a loan must be repaid. If it is written off, the amount written off is treated as income of the director and is subject to income tax, PRSI, and USC.
What is the Companies Act 2014 limit on director loans?
Loans exceeding 10% of the company’s relevant assets require prior shareholder approval by ordinary resolution. Loans to connected persons are also restricted.
This article is for informational purposes only. Consult a solicitor of your choice. for advice on your specific situation.
