Capitalising Director Loan of £120K
newme
Registered Posts: 9 New contributor 🐸
Hello there
I have been asked to research a solution for this matter :ohmy:
company has an authorised share capital of 2,000 £1 shares with 1 £1 share in issue.
The director owns the share.
There is £120,000 on CR side of the DLA.
The bank have ask the director to capitalise the £120K.
What the options here??
thanks
I have been asked to research a solution for this matter :ohmy:
company has an authorised share capital of 2,000 £1 shares with 1 £1 share in issue.
The director owns the share.
There is £120,000 on CR side of the DLA.
The bank have ask the director to capitalise the £120K.
What the options here??
thanks
0
Comments
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I believe the accounting treatment is as follows:
With the share capital:
Dr Bank / Director's Loan Account 1
Cr Share Capital 1
With the loan:
Dr Bank 120,000
Cr Director's Loan Account 120,0000 -
I think you need to talk to an accountant who know what to do.
As authorised capital is £2000.00 How can you issue shares of £120,000!
For sake of the arguement, lets say you issued shares on premium then those journal would be wrong.
There are few issues involved i.e. authorised share capital, share premium accounts, etc, I say speak to some one who is expert in this area.
Nilesh0 -
Nilesh Mandvia wrote: »There are few issues involved
Nilesh
thanks for the feedback.
Nilesh you are right conversion to capital is no straightforward as it will incur stamp duty which is not ideal solution but to capitalise it as unsecured long term loan could the trick.
I am not sure it would be that straightforward.
will it be reported to companies house even the loan is unsecured??0 -
but to capitalise it as unsecured long term loan could the trick.
I am not sure it would be that straightforward.
will it be reported to companies house even the loan is unsecured??
I not sure whether this would help as probably bank wants to see some more capital investment from the shareholders/directors. Even if you capitalise DLA by unsecured long term loan, the amount still would be showing on accounts as owing to the director.
I know this is not the answer you are looking for but unfortunately you can not rely advice received on the web forum for a complex issues.0 -
You could try asking this question on accounting web0
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I think it already has been - or spookily there is an exact same thread on that site :scared:
Claudia0 -
claudialowe wrote: »I think it already has been - or spookily there is an exact same thread on that site :scared:
Claudia
You are right.:thumbup1:
Ok let me share the outcome with you then..
Talked to bank manager and it was agreed that it will be included in the Notes to the Account that the Director Loan will only be payable once the bank has been paid in full
It did the trick...0
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