You'll find a Shareholder Current Account (SCA) in the balance sheet of most companies.
It generally reflects the money you've put into the business as a shareholder (funds introduced), and the money you've withdrawn (drawings).
You vs Bank
The company could obtain money through a bank loan - it would owe the bank money. However, often that's not possible and the banks charge interest. Instead, you can deposit personal money into the company's bank account. From the company's perspective, it owes you that money (and you won't charge interest).
If the company had borrowed from the bank, the company would show the money due as an overdraft or a loan - a liability in the balance sheet. When the company owes you money, it's also a liability, but we call it a Shareholder Current Account.
Think of it like the company having a flexible loan account or an overdraft - not with the bank or with a separate bank account, but with you. You are the bank account. You can give more money to the company (funds introduced) and the company can repay you by allowing you to take drawings.
Can I take out more than I put in?
You certainly can. You would have an overdrawn SCA. However, you’ll be in the position that you owe money to the company. In other words, the company has given you a loan - it's given you more money through drawings, but you haven't introduced enough funds to repay it. When that happens, the IRD requires that the company charge you interest - they have a set rate each year.
Do I actually need to pay interest to the company?
Not cash - no. We make an adjustment at the end of the year. This results in the company having interest income.
Am I paying interest to the IRD on the overdrawn current account?
No – only to the company. You’ll usually only pay interest to the IRD when you don’t make your required payments on time.
For the company directors out there – if the company becomes insolvent as a result, there could be serious consequences,
For shareholders - there is a risk of losing the limited liability protection of a company. If problems arise, you may be liable up to the amount of the overdrawn current account.