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06 September 2016
How to deal with a longstanding loan from a company to connected parties.
My client is a husband and wife-owned company which retails and installs fitted kitchens. The company’s solvency position is neutral. However there is a longstanding director’s loan account which currently stands overdrawn by £90 000. The company trades from premises owned personally by the directors and it pays rent to them for the use of such premises. The following course of action is proposed:
- Form a holding company (HoldCo): Arrange a share-for-share exchange whereby the husband and wife shares in the existing trading company (TradeCo) are swapped for shares in HoldCo.
- Inject the trading premises currently owned by the directors personally into the TradeCo thereby creating a credit to his loan account of the order of £200 000 the current market value of the trading premises.
- Transfer-up the trading premises into HoldCo with the consideration...
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