What is an Overdrawn Director’s Loan Account (ODLA)?

Molly Monks - IP at Parker Walsh
March 29, 2025

Essentially, it means the director owes money to the company.

An ODLA arises when a director withdraws more money from the company than they have contributed, without classifying it as salary, dividends, or reimbursed expenses.

How Do I Know if I Have an ODLA?

To determine whether you owe money to the company, consider the following steps:

  • Check your accounting software (e.g., Sage, Xero).
  • Consult your bookkeeper or accountant.
  • Review the company’s financial statements or management accounts.
  • Examine the company’s books and records.
  • Check bank statements.

Does the Liquidation Process Automatically Write Off an ODLA?

No, an ODLA is not automatically written off during liquidation. If the loan is undisputed and you have the ability to repay it, the liquidator will expect repayment.

During liquidation, the appointed liquidator is responsible for collecting company assets and repaying creditors. Since an ODLA represents money owed to the company, the liquidator will attempt to recover the outstanding balance from the director.

What Should I Do If I Can’t Afford to Repay My ODLA?

If you are unable to repay your ODLA in full, follow these steps:

  1. Communicate with the liquidator – Determine the exact amount owed and discuss your financial situation. Keeping an open line of communication is crucial.
  2. Assess your financial position – Review your income, expenses, and available assets to see what you can reasonably afford.
  3. Negotiate a repayment plan – If full repayment is not possible, consider offering a structured repayment plan.
  4. Propose a partial settlement – If you can pay a portion of the debt, the liquidator may agree to write off the remaining balance, depending on your financial circumstances.

How Do I Prove I Cannot Afford to Repay My ODLA?

To verify financial hardship, the liquidator will request detailed financial information. You will be required to provide:

  • Income details (e.g., wages, pensions, benefits).
  • Expense breakdown (e.g., mortgage/rent, utilities, household bills).
  • Asset inventory (e.g., property, vehicles, savings).
  • Liabilities summary (e.g., loans, credit card debt, mortgage balances).
  • Supporting documents, including bank statements and mortgage statements.

By providing a clear and transparent financial overview, you can negotiate a feasible repayment arrangement or demonstrate your inability to repay the debt.

Molly Monks M.I.P.A
Licensed Insolvency Practitioner at Parker Walsh

I am Molly Monks, a licensed insolvency practitioner at Parker Walsh. I have over 20 years of experience helping directors with the financial struggles they may face. I understand that it can be overwhelming and stressful, so I offer practical straightforward advice, which is also free and confidential. I spend time with directors to get a good understanding of their business and their goals, therefore providing the best tailored advice possible.

Email: molly@parkerwalsh.co.uk

Phone: 0161 546 8143

WhatsApp: 07822 012199

If you have any questions about your business, we're always happy to help. Our advice is free and confidential.
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