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BIK where a company guarantees a personal loan ?

Are there BIK issues if a company guarantees a personal loan made to a Director by another company ?

An individual (A) is being lent money from a company (Company B). The individual is a Director and 100% owner of his own company (C). His company (C) is guaranteeing the loan. He is then loaning the money back to his own company (C) which it will use to buy shares in Company B. A tangled web I know. Are there are BIK issues with the fact that Company C is guaranteeing the personal loan to him ? 


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16th Apr 2018 11:54

Presume not public companies but private companies involved here, thus sidestepping financial assistance rules?

Any reason why such a convoluted route, any reason Company B does not lend funds direct to Company C?

Does Company B have a loan to participator issue after company C acquires shares in Company B, as A is a participator in company C , does Company C control Company B after the transaction?

I think a BIK likely may arise re the director and his company re the guarantee though struggling to find express provision (have not looked very hard). I have in past come across proposed bank lending to a partnership where a limited Company was to guarantee the partnership loan from the bank and the bank's solicitors were not happy with such an arrangement, but that was a fair time ago so not sure if such reservations are still appropriate.

(Edit first line final paragraph May for Will)

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16th Apr 2018 15:06

Many thanks for your response DJKL, it is greatly appreciated. Yes both are private companies. I have asked them that question myself as I am unsure why the loan is not just from company B to C. I will let you know. I thought too that because of the guarantee there would be a BIK but maybe only in the event of a default by the Director? Company C will not control Company B after the transaction.

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16th Apr 2018 15:44

The whole arrangement seems highly artificial and contains various unnecessary steps - which should be a warning sign. You should be asking what the overall objective is and how each individual step contributes to achieving that objective.

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to johngroganjga
17th Apr 2018 08:07

Thanks John, I didn't understand the rationale in the arrangement being set up as proposed. Having spoken to the client again they are going to simplify the arrangement and Company B will now just lend Company C the money which will then be used by Company C to buy the shares in Company B.

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18th Apr 2018 12:49

I think there are issues of fraud unless the bank is fully aware of what is happening.

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By Ruddles
to geoffmw1
18th Apr 2018 12:56

Where's the fraud (or where would it have been under the original proposal)?

What has the bank got to do with it?

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