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Converting Share Premium into Director's Loan Account

Converting Share Premium into Director's Loan...

When I first started my company, I invested a total of £5,253. This was for 6 shares at £1 each plus a share premium of £5,247.

Approximately 6 years later, I have realised that it might have been more sensible if I'd created a Directors Loan Account instead of the Share Premium Account, and I am now wondering whether it's possible to convert the Share Premium Account into a Directors Loan Account of £5,247?

Also for information, during the 6 years, I have transferred 5 of my 6 shares to my wife so I'm assuming the share premium value should be split 5/6 to my wife and 1/6 to me. Is this correct? Obviously this is important when considering the conversion of that account into DLA's.

I look forward to your answers and suggestions.

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28th Jun 2009 11:03

Who the devil advised you to set it up like that in the first pl
I think you are strapped. The share premium account is not available to you in this way. I would be intrigued to know why you did this. It seems bizarre.

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By Anonymous
29th Jun 2009 13:33

Not possible
The share premium cannot be distributed without a capital reduction or liquidation. Turning it into a directors loan account would be a distribution, so cannot be done.

You could consider a capital reduction - see the guidance at:
http://www.companieshouse.gov.uk/about/gbhtml/gba6.shtml

However the legal costs of this might be prohibitive.

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By max.lee
06th Jul 2009 12:38

The CA 2006 makes a capital reduction fairly straightforward for
Its just a question of passing a special resolution, getting the directors to sign a statement of solvency, preparing a memorandum of capital and filing it with Companies House confirming that the requisite papers have circulated amongst the members. You can then credit the SP to distributable reserves. If you then want to create a directors loan account I suppose you could just declare a divi without paying it. Why bother? Do make sure that you don't go belly up within a year of the capital reduction leaving 3rd part creditors out of pocket.

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