Moving a directors loan

[DLT]

Hi,

We have 3 limited companies setup, a holding company and 2 subsidiary companies, one of the subsidiary companies has a directors loan of about £70000 (owed from the company to the director), I would like to know if it is possible to move this loan to the other subsidiary company as we are about to dissolve the company it is currently in.

Any comments would be appreciated.

Many Thanks,

DLT

[Tax Champion]

This is a tax and company law issue. When the surviving subsidiay company takes over the loan what does it get in return? Is the company being desolved solvent? does it have accumulated losses, what trade did it have and what happened to it?

[DLT]

Hi,

Thanks for your reply.

In answer to your first quesiton, the surviving subsidiary company wasnt going to get anything in return for taking over the loan, unless it has to by law.

The company being desolved will be solvent once the directors loan is moved, at the moment it is insolvent but the loan is the cause of this. It has no accumulated loses, it was trading but business has decreased and we have decided to close that particular avenue of business and concentrate on other things, but of course we dont want to lose our directors loan therefore if it is possible to move it to the other company then that would be great.

Hope this helps.

Thanks again,
DLT

[wamstax]

It would appear that the director's loan will have become worthless if the company is insolvent therefore the directors would be undertaking a depreciatory transaction on the surviving company and/or receiving a distribution which would be illegal as there would be no residue of profits available to distribute......
You need to take careful legal and tax advice on a one to one basis before you do anything in relation to this so that an adviser can look at all the paperwork and implications of your intended actions