Directors’ Expenses

The general prohibition as set out in the Companies Act does not preclude companies from providing any of the directors with funds to meet expenses properly incurred, or to be incurred, for the purposes of the company or for the purposes of enabling a director to perform his duties as an officer of the company.

However, as a result of receiving an advance in respect of expenses to be incurred, a director becomes indebted to the company where the aggregate of vouched expenses amounts to less than the amount advanced, in such instances any such debt must be repaid within 6 months of the amount advanced and failure to do so is deemed an offence.

The section grants an exemption in respect of situations where, for example, a company guarantees a director’s credit card expenditure or loans a director funds to discharge his expenses and is only of application under such circumstances. Where the company pays for a director’s expenses and no liability to repay arises as would be normal commercial practice, this is not a loan and the general prohibition does not apply in the first instance.