I have a UK limited company of which I am the sole director and shareholder. I am interested in using the retained capital in my company to purchase a property in the Republic of Moldova (Eastern Europe). The problem I have is as follows....
My partner was born in Moldova and her farther has developed property in this region for most of his life. I have an opportunity to buy a half developed property with the view to completing the development within 3-5 years. The property is a duplex and I would acquire half of the title for 300,000 EUR on the basis that I invest this money to see both halves of the duplex to completion. The logistics of how this would be legitimately financed from a UK company and how the title would be exchanged and at what point in time is the subject of discussion.
The title is currently owned by my partners farther for both halves of the duplex however he must divide the title into two and effectively transfer half of this to my company in exchange for an agreement for my ltd company to pay a series of instalments in order to finance the development.
There is a time constraint here that complicates the issue. The property does not currently have any windows and the external walls must be rendered. The Moldovan winters can be quite harsh and sustained during which time we cannot do any exterior work. Therefore if we do not finance the first stage quickly it will delay the project and we may end up paying more for the materials (Due to the economic situation the labour and materials are very cheap now).
In Moldova their equivalent of the Land Registry are a little bit slower. To divide the title and transfer half to my company can take 3 months. For the interim period my partners farther has suggested that we draw up a simple loan agreement of 50,000 EUR from my company to provide him with the money to start the project. The title would later be divided and transferred with a superseded agreement. I have discussed this with my accountant who is a little bit nervous about the initial loan as it would not be secured against any collateral. I generally don't like to be rushed when making these kind of decisions even though I have no reason not to trust my partner's farther.
Here is my question...Is it straight forward for a limited company to lend money unsecured to an individual in a foreign country? The primary business activities of my company are nothing to do with providing financial services or developing property. Do I need to inform HMRC and would they have any way to intervene?
My current position is to wait for the title to be divided and to have some security for my money, am I right in doing this? If the opportunity disappears as a result of stalling the process then so be it!
Any other suggestions would be very appreciated!!
Sorry for the long post... I just felt it was necessary to provide as much detail as possible.