COMPANY BENEFIT IN KIND

COMPANY BENEFIT IN KIND

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Would really like your help with this if possible. I own 50% of Company A and also 50% of Company B. I would now like to buy the other 50% of Company B but I think it would be easier for Company A to buy the 50% shares of company B. Could Company A borrow the money from Company B (circa £400K) to buy the shares from Company B and would this be a Bik for Company A as it has a loan from Company B.

Sorry I hope this makes sense, but my issue is that it is too difficult borrowing money from the bank to buy shares and Company B has almost £800K in its bank account and feel it would be easier to borrow the money from the company itself rather than going doen the bank lending route. Also if I borrow it personally, I will end up paying more tax due to Bik and as I take big dividends I will also be paying heavy personal tax.

Many thanks for reading this and with any answers

Replies (5)

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By neileg
14th Oct 2011 14:47

No but yes

A company is prohibited from providing finance to buy its own shares. What may be possible is for company B to buy back the 50% that you don't own and leave you as sole shareholder.

Any scheme like this will need proper legal and accounting advice and prior approval from HMRC.

By the way, if company A buys the 50% of B that doesn't make you 100% owner of B.

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By samnico
14th Oct 2011 16:45

share buy back

Thank you for your reply...how does a company buy back its own shares please?

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Replying to FirstTab:
By John McLane
14th Oct 2011 17:49

As neileg said

samnico wrote:

Thank you for your reply...how does a company buy back its own shares please?

You go and see a professional as there are rigid procedures to follow and it really is safer and easier to pay someone who knows what they are doing to do it for you.

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By law man
15th Oct 2011 15:34

Financial assistance in purchase of own shares

Look at Companies Act 2006 section 678. In essence, the prohibition is on the provison of financial assistance for purchase of shares in a PLC, not a private LTD company.

 

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By neileg
17th Oct 2011 09:59

OK

Yes, I had forgotten about the 2006 changes. However, professional advice is still essential. The point I made about company A aquiring the shares not resulting in 100% ownership is aslo still valid.

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