What would be the formal process for writing off a loan given to a company by one of its directors. The director in question is no longer going to be a director, is transferring their shares to another party and is happy for the loan to be written off. What tax implications might there be and how should it be accounted for?
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Is there any merit in the continuing directors/ shareholders purchasing the loan and adjusting the price for the share disposal (presuming an arms length sale) to allow for the loan, or some variant thereon?
We have twice needed to buy out both share and loan interests from departing shareholders/directors and on each occasion have taken this approach; the legal process has certainly been simple enough.
Once completed the continuing directors/shareholders can then take their time considering what they want to do with the liability.