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How to handle credit directors loan on sale

DLA on business sale

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I have a small limited company on which I have received an offer to buy. The proposal is an asset and goodwill purchase for a sum of £175,000, with payment in 12 instalments over 3 years. There is a credit directors loan of £180,000. The proposal is that we retain the company and rename it to allow the purchasers to set up a new company in a similar name to our current trading name. 
our renamed company will then invoice quarterly and money paid will be withdrawn from the directors loan. 
 

is this acceptable? Is there a route where shares are sold? 

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RLI
By lionofludesch
28th Dec 2019 15:11

Sure - presumably the company already has some funds because that £175000 won't be enough to settle your £180000 debt. And that's ignoring any Corporation Tax liability that may arise.

A sale of shares is a very different animal. You get money for your shares and hand over all the assets and liabilities of the existing company. You pay CGT on the excess of the sale proceeds over the cost of your shares. The sale price is often different as the tax may be different. I've glossed over a lot of detail but that's it in essence.

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By JDBENJAMIN
29th Dec 2019 22:33

Why are you not putting this question to your own accountant?

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Replying to JDBENJAMIN:
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By atleastisoundknowledgable...
29th Dec 2019 23:16

JDBENJAMIN wrote:

Why are you not putting this question to your own accountant?

An excellent question - they do after all have 12 partners/managers whose specialisms include “buy, sell, grow your business”. https://www.smithcooper.co.uk/people/?filter-service=buying-selling-grow...

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By atleastisoundknowledgable...
29th Dec 2019 23:20

@ OP - John (Webbo), as Lion pointed out, you’ve potentially forgotten about the CT on the sale.

Selling the shares in the company is another option, you really should talk this through with your accountants though.

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