Section 413 of the Companies Act 2006 requires the notes to a company’s accounts to give details of every advance or credit made to a director, and every guarantee the company has given on a director’s behalf, that existed at any time during the year. Small companies are not exempt: FRS 102 paragraph 1AC.36 repeats the requirement for Section 1A accounts, and micro entities must show the same information at the foot of the balance sheet.

What exactly does section 413 require?

Section 413(1) applies to a company that does not prepare group accounts. It must show in the notes to its individual accounts details of advances and credits it has granted to its directors and guarantees of any kind it has entered into on their behalf. Section 413(2) applies where a parent prepares group accounts: the group accounts must disclose advances, credits and guarantees given to the directors of the parent, whether by the parent itself or by any of its subsidiary undertakings.

The detail required for each advance or credit is set out in section 413(3):

  • its amount;
  • an indication of the interest rate;
  • its main conditions;
  • any amounts repaid;
  • any amounts written off; and
  • any amounts waived.

For a guarantee, section 413(4) requires its main terms, the maximum liability the company (or its subsidiary) may incur, and any amount paid or liability incurred in fulfilling it, including any loss on enforcement. Section 413(5) then requires totals: of the amounts advanced, the amounts repaid, written off and waived, the maximum guarantee liabilities and the amounts paid under guarantees.

The written off and waived categories were added by the Companies, Partnerships and Groups (Accounts and Reports) Regulations 2015, so older templates that only show advances and repayments are out of date.

Which loans and directors are caught?

Two subsections make the disclosure wider than many people expect.

  • Every director during the year. Section 413(6) says references to directors mean the persons who were directors at any time in the financial year. A director who resigned in month two is still covered.
  • Every arrangement that existed during the year. Section 413(7) applies the rules to every advance, credit or guarantee subsisting at any time in the year, whenever it was made, whether or not the person was a director when it was made, and (for a group) whether or not the lender was then a subsidiary.

The practical consequence is that a balance which was zero at both the start and the end of the year still needs disclosing if the director was overdrawn at some point in between. A loan made to someone before they joined the board is caught once they become a director, and a loan that was fully repaid during the year is disclosed together with the repayment.

The Act does not define advance or credit for this purpose. In practice an overdrawn director’s loan account is the most common example: personal bills paid by the company, cash drawn ahead of salary or dividends, and private spending on a company card all create a balance owed by the director. The mechanics of the loan account itself are covered in director’s loan accounts explained.

How does this apply to small companies and micro entities?

Section 413 is not one of the disclosures that the small companies regime switches off. For small entities applying FRS 102, paragraph 1AC.36 in Appendix C to Section 1A sets out the same list of details for advances, credits and guarantees and cites section 413 as its source. It also points out that paragraph 33.9 contains similar requirements for all related parties, and says that a small entity which is not a company gives the disclosure in relation to members of its governing body.

For accounting periods beginning on or after 1 January 2026, small companies also face the wider related party disclosures in paragraph 1AC.35, so a director’s loan will often appear in two places: the section 413 note and the related party note. The two serve different purposes and the related party rules are explained in related party disclosures.

Micro entities using FRS 105 have very few notes, but paragraph 6.2 of FRS 105 requires those notes to be presented at the foot of the statement of financial position and to include advances, credit and guarantees granted to directors as required by section 413. Because a micro entity’s balance sheet is the document filed at Companies House, these details are on the public record. See micro entity accounts under FRS 105.

What does a compliant note look like?

Illustration only. A small company has two directors. At the start of the year Director A owed the company £8,000. During the year the company paid £20,000 of her personal expenses and she repaid £15,000, leaving £13,000 owed at the year end. Director B owed £5,000 at the start of the year, and the board waived the whole amount during the year. The company has also guaranteed Director A’s personal bank overdraft up to £30,000, and nothing has been paid under it.

Director Opening balance Advanced Repaid Written off Waived Closing balance
Director A £8,000 £20,000 £15,000 Nil Nil £13,000
Director B £5,000 Nil Nil Nil £5,000 Nil
Total £13,000 £20,000 £15,000 Nil £5,000 £13,000

The note would go on to say that both balances were unsecured, interest free and repayable on demand, which covers the interest rate and main conditions. For the guarantee it would state the main terms (a guarantee of Director A’s personal overdraft with a named bank), the maximum liability of £30,000 and that no amount has been paid or liability incurred under it. Showing the opening and closing balances alongside the movements is the clearest way to give the amount and every category that section 413(3) and (5) ask for.

How does the disclosure connect with approval and tax?

Section 413 is a disclosure rule only. It does not decide whether the loan was allowed. Under section 197, a company may not make a loan to a director, or give a guarantee or security for a loan made to a director by someone else, without approval by a resolution of the members, subject to the exceptions in the Act. A guarantee of a director’s bank overdraft, like the one in the example, is the kind of transaction that needs that approval. See loans to directors and member approval.

Tax runs on separate rules again. Where a close company makes a loan or advance to a participator or an associate, section 455 of the Corporation Tax Act 2010 imposes a charge on the company, due nine months and one day after the end of the accounting period in which the loan was made. A loan that is written off or waived also has its own consequences for the director. The figures in the note should agree with the loan account and with any section 455 calculation in the company tax return, because inconsistencies are an obvious starting point in an HMRC enquiry. Repayments made just before a year end and redrawn shortly after are covered in bed and breakfasting director loans.

How is a director’s loan measured before it is disclosed?

The section 413 amounts are the amounts lent, repaid, written off and waived. The carrying value in the balance sheet is a separate question for FRS 102, where a loan at below market interest may be a financing transaction measured at present value, with a small entity concession for some loans from directors. That accounting is explained in directors’ loans under FRS 102. Whatever the measurement basis, the note must still show the details the Act requires.

What happens if the note is wrong or missing?

Section 414(4) makes it an offence for a director to approve annual accounts that do not comply with the Act where the director knew they did not comply, or was reckless as to whether they did, and failed to take reasonable steps to secure compliance or prevent approval. A missing section 413 note is a straightforward example of non compliance. If accounts have already been filed without it, the directors can correct them through the revised accounts procedure described in revised and defective accounts.

Banking companies and the holding companies of credit institutions have a lighter rule: section 413(8) says they need only state the totals of the amounts advanced and the maximum guarantee liabilities.

What mistakes come up most often?

  • Disclosing only the year end balance, so that a loan that was cleared before the year end disappears from the note.
  • Leaving out directors who resigned during the year, or who were appointed after the loan was made.
  • Omitting the written off and waived columns, or showing a waiver as a repayment.
  • Forgetting guarantees, particularly personal borrowing of a director secured on company assets or guaranteed by the company.
  • Not saying anything about interest and terms, when an indication of the rate and the main conditions is required even if the loan is interest free.
  • In group accounts, missing advances made to the parent’s directors by a subsidiary.
  • Assuming that micro entity or abridged accounts remove the disclosure. They do not.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.