Moving excess profit to another limited company

Discussion in 'Accounts & Finance' started by DevilsAdvocaat, Aug 12, 2019.

  1. DevilsAdvocaat

    DevilsAdvocaat UKBF Newcomer Free Member

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    I’d be really grateful if anyone has any ideas as to how best to achieve what I’ve outlined below. I’ve read around but not really found anything obviously useful so far :-

    My business partner and I have been running a small company for a few years and have built up an excess of profits. We each own 50% of the company and are paid through a combination of PAYE and dividends.

    The company is doing well and we wish to continue trading but have different plans on what to do with the excess profits.

    I would like to use “my” half of the profits to invest in another company and my business partner would prefer to invest in property via a ltd company.

    In order to facilitate this we’d like to create Company B and Company C, one owned wholly by me and one owned by my business partner.

    My question is how can we move half of the excess profits directly to each of Company B and C without paying it out to ourselves in the interim?

    Am I right in thinking that we need to create an additional share class through which Company A can pay dividends to Company B & C?
     
    Posted: Aug 12, 2019 By: DevilsAdvocaat Member since: Jan 29, 2013
    #1
  2. UK Contractor Accountant

    UK Contractor Accountant UKBF Big Shot Full Member - Verified Business

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    or do a share for share exchange - for example company B issues shares to Partner 1 in exchange for his/hers 50% of A's shares.
     
    Posted: Aug 12, 2019 By: UK Contractor Accountant Member since: Sep 18, 2013
    #2
  3. DevilsAdvocaat

    DevilsAdvocaat UKBF Newcomer Free Member

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    Many thanks for the suggestion.
     
    Posted: Aug 12, 2019 By: DevilsAdvocaat Member since: Jan 29, 2013
    #3
  4. DevilsAdvocaat

    DevilsAdvocaat UKBF Newcomer Free Member

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    After mulling this over a little, I'm now wondering if the easiest option would be to simply loan the money from Company A to Company B and C and write the loan off at some point. Is there any reason why a simple approach like this cannot be taken?
     
    Posted: Aug 13, 2019 By: DevilsAdvocaat Member since: Jan 29, 2013
    #4
  5. Mr D

    Mr D UKBF Legend Free Member

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    Is writing the loan off in the best interests of the lending company?
     
    Posted: Aug 13, 2019 By: Mr D Member since: Feb 12, 2017
    #5
  6. Mr D

    Mr D UKBF Legend Free Member

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    Is writing the loan off in the best interests of the lending company?
     
    Posted: Aug 13, 2019 By: Mr D Member since: Feb 12, 2017
    #6
  7. DevilsAdvocaat

    DevilsAdvocaat UKBF Newcomer Free Member

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    Thanks for the reply. As you suggest, writing the loan off technically wouldn't be in the best interests of the lending company - I'm assuming here that you're alluding to sort of rule which means that this approach is therefore unwise?

    My business partners preference is to create a new share class which can be used to pay dividends to Company B and C but once created I'm unclear as to whether I can simply transfer the new shares across to the new companies e.g. is some sort of payment necessary?
     
    Posted: Aug 13, 2019 By: DevilsAdvocaat Member since: Jan 29, 2013
    #7
  8. Mr D

    Mr D UKBF Legend Free Member

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    As a director you act in the best interests of the company.

    https://www.gov.uk/guidance/being-a-company-director
     
    Posted: Aug 13, 2019 By: Mr D Member since: Feb 12, 2017
    #8
  9. SteLacca

    SteLacca UKBF Ace Free Member

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    That's as maybe, but UKCA has given you the correct, most straightforward, and universally accepted answer.
     
    Posted: Aug 13, 2019 By: SteLacca Member since: Jun 16, 2016
    #9