SGS 13 (Duties II) Flashcards
What is the test for a close company?
one that is under the control of:
5 or fewer participators (e.g. 5 participators hold a majority of voting shares)
OR
Any number of participators who are also directors (SHs , also directors who hold a majority of voting shares)
For the close company test, what is the meaning of ‘participator’ and ‘control’?
P = person with a share or interest in the capital or income of the company.= (e.g. shareholder)
C = ability to exercise control over a company by voting rights (holding more than 50% of the voting shares).
What is the effect of being a close company?
Loans in excess of £15,000 are caught by CTA 2010.
32.5% corporation tax must be paid on the loan, 9 months and one day after the end of the accounting period in which the loan was made.
What is the effect of a loan to a close company being written off?
Tax paid by the company will be refunded by HMRC
Participator to whom loan made deemed to have received a dividend equal to AMOUNT being WRITTEN OFF.
Has to account to HMRC for any income tax payable on that deemed dividend.
What are the six steps to consider in the context of loans to directors?
Nature of COMPANY entering into transaction
Nature of TRANSACTION
SH APPROVAL required and if so, which company?
Statutory EXCEPTION?
SANCTION for not obtaining SH approval?
Directors complying with statutory duties?
What is a:
Quasi-loan
Credit transaction?
company pays off principal debt, employee pays company back (e.g. travel card loan)
Provision of goods or services to be paid back at a later date.
Difference between a guarantee and a security?
G = promise to pay
S = collateral asset.
For a breach, who is liable?
director, any person connected and any other who authorised the transaction (s.213(3) and (4)).
Can these matters be dealt with by short notice?
No, if SH approval needed, a memorandum setting out details of the transaction must be prepared and made available for inspection at company’s registered office for at least 15 days ending with the date of the GM
Board resolutions to make a loan to director?
BM1: approve form and notice; instruct co sec to make memorandum available (s.197(3)(b) and (4)); convene a GM
BM2: approve entry into loan transaction; authorise a signatory to enter into it; instruct co sec to deal with post meeting matters.
consequences of a contravention?
s.213 - transaction voidable unless the exceptions listed apply.
s.214 - can be affirmed by shareholders.
Irrespective of whether it has been avoided, director and person connected and any other who authorised are liable to account for any gain and indemnify company in respect of any loss or damage that results.
Defence to a contravention?
s.213(6) and 213(7).
