Can any one advise me how I go about converting directors loan accounts to shareholders capital account.
It is my 1st year trading, there are 2 shareholders with equal shares of 5000 at £1 each fully paid up.
How can I convert additional 2 directors loans into the share capital?
Thank you in advance for any advise.
Replies (11)
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Issue new shares
I'd have thought you could simply issue new shares with the consideration being taken from the DLAs.
Good point!
But I suppose the issue of shares would still be legal even if the consideration created, or enlarged, a debit balance on DLA.
other considerations
You say "additional two directors" are these directors non share holders at present ?
Does the company have a value ?
Agree with secondhand it is an unsual proposal.
"additional"
I think the OP meant "additional two directors loans" - ie. In addition to the initial share capital investment
..I may be wrong though
One good reason may be...
The company is closing.
The company cannot afford to repay the loan due to the director shareholder. If the debt to the director is written off it creates a taxable gain in the accounts.
By converting the loan to share capital, the debt is transferred to share capital. No taxable gain is then incurred.
Of course the shareholder/director still does not receive the value of the loan but there is no CT charge.
Any thoughts?
Hi All
I would like to know your views on the reverse of this situation?
I have share capital that I need to put into as director loans, can this be amended and if so what are the steps?
There are a number of routes to your intended position, but unlikely to be as straightforward as the simple reverese of a debt/equity swap. When were the shares issued?
the shares were issued a few years ago, however the latest tax year accounts and returns are due so I would like to amend for that purpose.
can it be amended on companies house?