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Movement of share premium

Movement of share premium

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I have two Ltd Companies, A owns 100% of the share capital of B. B is the trading company (tech start up). Investor pays £500k in B's bank account. However the intention is that the investor will get shares in A for his investment (no idea why he did not pay the money into As account in the first place). Lawyers are then engaged to produce board minutes and resolutions to produce the paper trail to show that the deposits are to be treated as convertible loan notes and which convert into equity in company A. The investment, the issuance of loan notes and the conversion into equity all happen in the same financial year. The shares were provided by the allotment of an additonal 50 x £1 ordinary shares in A. There is also a clause in the loan notes that the 'loans' can be used anywhere in the group. Investor wants shares in A. So my question is - with the investors initial money  in B (and mostly already spent in B) and with a paper trail supporting the issuing of shares in A what would be the accounting entries to move the investment so it ends up as share premium in A.  My initial thoughts were to create a straight forward intercompany transaction but the director asked whether there are any alternatives to avoid B having a negative balance sheet. I have explained the intercompany would eliminate upon consolidation in the group accounts but he was keen to show B with a clean(ish) balance sheet. Any thoughts appreciated - thanks in advance.

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Hallerud at Easter
By DJKL
23rd Sep 2019 18:25

You could add another leg (but no use re years already past) and Holdco could now subscribe for £500k shares in Sub, whether re future planning/tax/etc this is a good idea ought to be referred to the Group's accountants.

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By Matrix
23rd Sep 2019 18:58

Are these your companies or are you the accountant?

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Replying to Matrix:
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By Morebeans
24th Sep 2019 11:19

accountant (sole practitioner)

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By johngroganjga
24th Sep 2019 07:44

What was the double entry in B when the £500k was paid into its bank account?

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Replying to johngroganjga:
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By Morebeans
24th Sep 2019 11:21

accounts are not finalised in B (or A). However original entry was DR Bank CR loan/loan notes

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Replying to Morebeans:
By johngroganjga
24th Sep 2019 14:31

So how does moving it give B a negative balance sheet?

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