convert directors loan account to share capital

convert directors loan account to share capital

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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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By TerryD
16th Apr 2014 16:42

Issue new shares

I'd have thought you could simply issue new shares with the consideration being taken from the DLAs.

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By GuestXXX
17th Mar 2015 16:35

.

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By TerryD
16th Apr 2014 17:15

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.

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By Mary Lou
16th Apr 2014 18:01

Yes the company does owe the directors the loan accounts.  Does that mean I can simply apply to companies house to issue new shares?

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By GuestXXX
17th Mar 2015 16:35

.

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By Tosie
17th Apr 2014 08:52

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.

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Replying to lionofludesch:
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By User deleted
17th Apr 2014 09:14

"additional"

I think the OP meant "additional two directors loans" - ie. In addition to the initial share capital investment

..I may be wrong though

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By John Cotter
20th Aug 2014 09:28

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?

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By dipenjoshi
27th Sep 2017 17:46

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?

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Replying to dipenjoshi:
By Ruddles
27th Sep 2017 18:24

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?

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Replying to Ruddles:
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By dipenjoshi
27th Sep 2017 18:39

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?

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