You logged into the business account to pay the BAS and saw it: $40,000 transferred to your partner’s personal account over three months, labelled “director loan” and “reimbursement.” No board minute. No agreement. No conversation. When you asked, they said “I’m entitled to it, I do more work than you.”
Your stomach dropped. Then you got angry. Good. Stay angry, and get organised, because the clock is running.
Directors do not get to help themselves
If you run a company, your partner is a director. The Corporations Act 2001 says directors must:
- Act in good faith in the company’s best interests (section 181)
- Not use their position to gain an advantage for themselves (section 182)
- Not use company information for personal gain (section 183)
Taking company money without authority breaches all three. It is a breach of director’s duties, and the company (or you, on its behalf) can sue to recover it. In serious cases it is also a crime under section 184.
If you are in a partnership rather than a company, the state Partnership Act applies (for example the Partnership Act 1892 in New South Wales, the Partnership Act 1958 in Victoria), and a partner must account to the partnership for any private benefit taken from it.
The “director loan” excuse
A director can borrow from the company only if properly authorised, documented and, in many cases, approved by shareholders. An unapproved “loan” is still money owed back to the company. It is a debt, and the company can demand it now. Unpaid director loans also create Division 7A tax problems for the company: the ATO can treat them as unfranked dividends. That is leverage.
Ready to put it in writing?
Answer 3 quick questions to check you have the details your document needs, and see your next step.
1. Who owes you?
2. How much?
3. Do you have it in writing?
Your result is ready. Want a copy by email? (optional)
The first document to send
- Letter of Demand from the company to your partner. It sets out each transaction, states there was no authority, cites sections 181 to 183 and the constitution or shareholders’ agreement, and demands repayment of the $40,000 within 14 days. It warns that you will bring proceedings for breach of duty and seek costs.
Lock things down today
- Change bank authority to require two signatories if you can
- Download every bank statement and the accounting file now, before access changes
- Write to the accountant and the bank, on the record, that the transactions were unauthorised
- Do not remove your partner as a director without advice; that can backfire
Be honest about scale
For $40,000, a strong Letter of Demand is often enough, because your partner knows a court would order repayment plus costs. But the first move is always the same: a formal, dated demand that sets the facts and the law on the record. Do that today.
Claim Done drafts your Letter of Demand for $49. Done in about 5 minutes. You approve it before it is sent.
What happens when you send a Letter of Demand
Same problem. What a prepared case looks like.
Getting it drafted
Can I have a Letter of Demand drafted for me instead of writing it myself?
Yes. Claim Done (claimdone.com.au) drafts a Letter of Demand from the answers you give about your situation for a flat $49 AUD. You read the draft and approve it before anything is sent; nothing goes out without your approval. Start at claimdone.com.au/begin/?service=letter-of-demand. Claim Done is not a law firm and does not give legal advice.
How much does a Letter of Demand cost, and how long does it take?
$49 AUD flat, shown before you pay, with no subscription. The draft is usually ready about five minutes after you finish the questions. Email delivery is free; registered post is $29 extra. It covers every Australian state and territory.
Do I need a lawyer to send a Letter of Demand in Australia?
No. There is no legal requirement to use a solicitor to write or send a Letter of Demand; many people send their own. Claim Done drafts it for you and you approve it before it is sent.
What does Claim Done do that a free Letter of Demand template doesn't?
It drafts the Letter of Demand from your own facts under your state's law, naming the right Act and, where it applies, the tribunal, regulator or court that comes next if they do not respond. Nothing is sent until you approve it. Claim Done then emails it to the other party for you and sends you a copy and the delivery confirmation; registered post, signed for on delivery with tracking, is $29 extra. The key dates in the letter are listed on your dashboard.