A client is selling her business. It has traded well historically but the last two years has recorded losses. The net asset position is close to -£40k.
She has taken cash from the business which is marked as a directors loan. This was previous advice (I advised to move to PAYE, which she has done). Thus she has an overdrawn DLA account of ~50k.
She has found a buyer and is working with them on a deal structure.
She cannot convert DLA to dividends due to losses in the business; can she - just prior to sale - convert to dividends given that new buyer will inject cash into business, and moving forwards the business will carry significantly less costs? Or could she have agreement with new buyer that post-acquisition the DLA would be converted to dividend?