Hello all. I would be grateful if you can advise how i account for this.
I worked for Company A which went into liquidation. Prior to liquidation the business from Company A was transferred over to Company B and liquidators were instructed re Company A. The money paid to the liquidators was borrowed from family friends and relatives. Mainly the same personnel run Company B. The friends and relatives that lent money to sort out the liquidation of Company A need to be paid back and the plan is that this will come from Company B bank account. How do I account for this? Can it be shown as a loan even though no cash was introduced into Company B?
Essentially the money was lent to the director of Co A to pay the liquidator to act etc. and to pay for professional advice to transfer business over to Company B ie they were helping to keep the business going but in another guise. The person that was a director of Company A now manages Company B but is not a director.
It's not the responsibility of company B and nor could it be....without some probing questions from the creditors perhaps.
Am still confused, ok maybe being deliberately obtuse......the person who was lent the money (individually, ie personally) is not a director, but 'manages' the business......is not a shareholder in company B then I take it? Or is, in all but name (but can't be for obvious reasons?)
Hope I've got them the right way round! On my phone and can't see the q when I writing the answer!
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Is the Director of Company A not allowed to be a Director? If Company B has legitimately bought the assets of Company A, then there's no reason why he can't be a Director of Company B, unless either the names are very similar, or he's been disqualified or made bankrupt. Is any of that the case?
Johnny, the repayments should be nothing to do with company B, so imo shouldn't even be going on the DLA, and if he's not a Director, then there's no DLA to put it to.
__________________
John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Yes you are echoing my thoughts. This debt has nothing to do with company B. There is an expenses account for this individual in Company B that should be reconciled when all receipts come in. Getting hold of these receipts/invoices to back up the expenses is like pulling teeth. I am always going on about this account and am very unhappy that money is moved out of the business to support up coming expenses that will go on personal credit card. The liquidator (according to this manager) said that they can "manage" the business so long as they have no access to the bank (the manager clearly has access to the bank). I believe that I will eventually get some support for maybe 60% of the money that has been transferred out of the company. This week I was told that a chunk of the money that I am questioning is to pay back the loan from friends and family. I don't believe this and pretty much said so.
In my view this is money that they have taken out of the business that either I get support for or it goes as a bonus.
The "manager" of company B is not barred from being a director until later this year. The managers partner is the director of the company (in name only). I suppose if the business is profitable at the end of the year some of it could be a dividend
Yes John I agree, however with the company being effectively in the same hands, the only person able to pay this is via the DLA as it is nothing to do with company B. There is no other legitimate way of extracting the funds.
__________________
Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
Yes John I agree, however with the company being effectively in the same hands, the only person able to pay this is via the DLA as it is nothing to do with company B. There is no other legitimate way of extracting the funds.
That's true. We now know that the "managers" partner is the Director, so funds could be paid back through their DLA, but as Fiona says, the company has to make a retained profit in order to do so. In the absence of the partner though, how did the manager plan on extracting the funds, which goes back to what Fiona's question was.
Fiona, does the company have an accountant? If so, I would ask them the question as to where they want it putting. If not, then check with the partner if it's ok to put it in the DLA. I emphasise that because that isn't a decision the manager can make.
For reference, if the company doesn't make enough retained profit to pay the loan off then it's a loan that needs repaying within 9 months of the year end, otherwise it is subject to tax at 25%.
It's probably not your place to say, but this "manager" will be acting illegally once he can no longer be a Director, as he would effectively be a shadow director.
__________________
John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
In answer to your questions, the company is below £1m turnover and is not audited. I am not sure if they have lined up new accountants for New Co but the last set of accountants merely took figures from the ledgers had a quick scan and prepared accounts based on figures that were provided. The wool was pulled over their eyes as the book keeping that was done previously was pretty dodgy!
Re asking the "partner" I have never met them and am unlikely too so any answer I get will not be theirs but that of the person that is managing the business.
So in conclusion, I think that I leave the funds in what is effectively a DLA and will offset this by bonus and reimbursement of expenses as and when I get any supporting documentation.
This individual needs to stop thinking like they are a sole trader. It drives me mad!
So in conclusion, I think that I leave the funds in what is effectively a DLA and will offset this by bonus and reimbursement of expenses as and when I get any supporting documentation.
This individual needs to stop thinking like they are a sole trader. It drives me mad!
I'm inclined to agree with you.
__________________
John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
How about separating it out from the usual DLA, keeping that in one separate account called 'I don't know what to do with these as they are not company nor shareholder related'. Or some such......obvious then that the Account has to ask some questions at year end.
Or better still ring that accountant now and ask for guidance....if you are allowed to speak to them.
Plus if you are a member of a prof body, maybe give them a call.
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
