I'm taking care of the bookkeeping for a LTD retrospectively (one shareholder who is also the sole director).
The LTD was started with £1,000 worth of share "capital" which was never paid in. The director started the work and money eventually hit the bank account as a result of clients paying their invoices.
I'm unsure how to record the shares in the books? Can I just credit "Share Capital" and debit "Director Loan Account" since the director/shareholder never paid in the initial capital?
I was under the impression that at least 20% of the share capital had to be called upon issue of the shares. Is that not the case?
The accountant did not make any objection to not paying in any capital and initially advised my client to make sure that there is at least £1,000 left in the bank account (eventually) so that the "value" of the company is consistent with the share capital. I'm not sure this was the best advice ever, but I'd be interested in other accountants' opinions on here.
Thanks.
Fabs
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I've got lots of clients who have only issued and paid for 1 share out of 10,000 shares, so 9,999 are unallocated. The extra shares were originally included so they could issue and allocate the shares in the future, of course now its a lot easier, so there is no need to have unallocated shares.
Paying for the share capitail via the Directors Loan account is normal, as its the simplest way of making sure its paid. Of course if its not, then the director could be called apon in the future to pay it if the company can't pay its creditors.
With new Ltd company clients, I always check the share information on the company annual return. Thats the information given to Companies House, which hopefully is correct and should be what is also reflected in the accounts.
-- Edited by YLB-HO on Monday 23rd of January 2012 10:54:09 PM
