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UKSolicitorJA
UKSolicitorJA, Solicitor
Category: Bankruptcy Law
Satisfied Customers: 7964
Experience:  English Solicitor with over 12 years experience
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There is no mention in the banks Terms and conditions what I

Customer Question

There is no mention in the banks Terms and conditions what I can use my buisness overdraft for and I need to be sure if I note a transaction on accounts summary that the buisness overdraft was used to pay a divident would this be classed as ilegal ?
Submitted: 9 days ago.
Category: Bankruptcy Law
Expert:  UKSolicitorJA replied 9 days ago.

Hello again,

In that case, you should check with the bank that you may access the overdraft to pay dividends as overdrafts are usually for short term cashflow requirements.

If you lie to the bank for that purpose you need the overdraft for, you may end up committing fraud which is a criminal offence.

May I help further?

Customer: replied 9 days ago.
It’s mentions it can be used for business purposes which this would fall under .
Expert:  UKSolicitorJA replied 9 days ago.

In that case, you may argue that dividends are for business purposes so you are covered.

All the best

Customer: replied 9 days ago.
The liquidator has advised that I can’t take money if the profit is not there however I have used the overdraft and we also have invoices payable which will credit the account the following month .
Expert:  UKSolicitorJA replied 9 days ago.

Yes, dividends are payable from profits, no profits, no dividends usually.

Customer: replied 9 days ago.
if I paid a dividend from business overdraft would that be illegal or not ? We had funds coming into the business the following month and was a short term measure and unfortunately Covid 19 occurred and my company contract was ended
Expert:  UKSolicitorJA replied 9 days ago.

Please see here for what are legal dividends and what are illegal dividends: https://www.rossmartin.co.uk/companies/running-the-business/783-legal-or-unlawful-dividends