Loans between companies
Wonder if anyone can help with the following situation (which is NOT an exam question! despite the way I have drafted it):
Mr Smith owns 100% of the shares of Companies A, B and C.
A is profitable and has surplus funds. B and C are new ventures and required working capital. The trades of A, B and C are all significantly different. Shares are all owned Mr Smith - i.e. no holding company and subsidiaries etc.
Mr Smith has transferred funds from A to B, and from A to C.
The question is: do the transfers of funds constitute a debit to Mr Smith's director loan account, or are they inter-company loans ?
My view is that the former is the case because the loans are not for the purpose of A's trade but I'd appreciate others' views on this scenario...