I have a friend who is looking for advice on following situation;
He is running a company with one other director and shares allocation is 80 to 20. The director who holds 20% is died last month. He actually invested £20,000 in business. The other director will actually work in the company.The business is in first year and they did not do well in first year. They have to submit accounts now. How they will treat the loan actually given by one director and compensation for the work of other director?
any comments
Thanks
Khan
Khan
Related resources
Replies (1)
Please login or register to join the discussion.
Need to get professional advice
The best advice to to your friend is to get professional advice and appoint an accountant for the business.
Re the 20% shareholding of the director who has died, did they have a shareholders agreement which takes into account such events? When there is more than one shareholder I always recommend my clients to draw one up with a solicitor, as it clearly caters for such occurrences.
The £20,000 should have been allocated as either a loan or equity investment or mix of the two at the time. This will dictate where it should be reported on the balance sheet.
If the other director has been paid a salary, then that is treated as a salary.
All these items and many more would have been addressed by your accountant.