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Co director investment query

Only for UK Tier 1 (Entrepreneur) points system

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ParulPatel
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Co director investment query

Post by ParulPatel » Wed Feb 10, 2021 10:48 am

Dear Sirs,

I have a query. I have set up a business in the UK. Can my co-director (who is not my team member) be a third party investor in my business.

Are there any rules preventing him to loan any monies to me or invest directly into the business on my behalf.

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marcnath
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Re: Co director investment query

Post by marcnath » Wed Feb 10, 2021 1:17 pm

ParulPatel wrote:
Wed Feb 10, 2021 10:48 am
Dear Sirs,

I have a query. I have set up a business in the UK. Can my co-director (who is not my team member) be a third party investor in my business.

Are there any rules preventing him to loan any monies to me or invest directly into the business on my behalf.
There is no impact of that on your immigration applications - it will not violate any immigration rules
My comments are in no way meant to be advisory. I have no professional knowledge of immigration. These are based on my own experience, convictions and personal interpretation of publicly available information.

matthew0301
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St Lucia

Re: Co director investment query

Post by matthew0301 » Fri Feb 12, 2021 3:52 pm

marcnath wrote:
Wed Feb 10, 2021 1:17 pm
There is no impact of that on your immigration applications - it will not violate any immigration rules
marcnath, hey!

Interesting case. What will be the way of proving that co-director/third-party investor invested as a result of the activity of the applicant? How this investment be counted if this was not invested in the form of share capital?

Can't HO look at it as if co-director invested(loaned money) as for his personal vision, supporting needs of the company?

Thank you

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marcnath
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Re: Co director investment query

Post by marcnath » Fri Feb 12, 2021 3:56 pm

matthew0301 wrote:
Fri Feb 12, 2021 3:52 pm
marcnath wrote:
Wed Feb 10, 2021 1:17 pm
There is no impact of that on your immigration applications - it will not violate any immigration rules
marcnath, hey!

Interesting case. What will be the way of proving that co-director/third-party investor invested as a result of the activity of the applicant? How this investment be counted if this was not invested in the form of share capital?

Can't HO look at it as if co-director invested(loaned money) as for his personal vision, supporting needs of the company?

Thank you
Just to be clear - there are no restrictions on the third party investing into the company.

However, that cannot be counted towards meeting the investment criteria of the applicant (OP did not indicate that was the case)
My comments are in no way meant to be advisory. I have no professional knowledge of immigration. These are based on my own experience, convictions and personal interpretation of publicly available information.

matthew0301
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St Lucia

Re: Co director investment query

Post by matthew0301 » Fri Feb 12, 2021 4:08 pm

marcnath,

I see, but it seems that author wanted to rely on this funding to progress with his extension application, because quote: "...invest directly...on my behalf".

Theoretically, if that is the case. Why can't he claim this towards the next application if accounts show activity? What do you think?

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marcnath
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Re: Co director investment query

Post by marcnath » Fri Feb 12, 2021 4:15 pm

Fair enough - I missed that.

As per immigration rules, that should still be possible if the investment is done as Share Capital. The only evidence needed for investment by Share capital is that the accounts need to show whose name the shares are in.

So, if there is an investor who is happy to put money into the company but have the shares held by the applicant, it should be ok. The investor risks losing all the money as they have no rights to it, but that is the investor's problem, not the applicants.
My comments are in no way meant to be advisory. I have no professional knowledge of immigration. These are based on my own experience, convictions and personal interpretation of publicly available information.

matthew0301
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St Lucia

Re: Co director investment query

Post by matthew0301 » Fri Feb 12, 2021 4:23 pm

marcnath,

Share Capital- yes. But if co-director invests in the form of a directors-loan, but signs a declaration that this investment is done due to an activity of OP?

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marcnath
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Re: Co director investment query

Post by marcnath » Sat Feb 13, 2021 5:28 pm

matthew0301 wrote:
Fri Feb 12, 2021 4:23 pm
marcnath,

Share Capital- yes. But if co-director invests in the form of a directors-loan, but signs a declaration that this investment is done due to an activity of OP?
There is no provision for "due to an activity...". The rules are clear that it has to be "on behalf of..." but the evidence specified requires a Director Loan to have been made from the applicant's personal account. And the loan agreement and the accounts need to show the amount is in the applicant's name.
My comments are in no way meant to be advisory. I have no professional knowledge of immigration. These are based on my own experience, convictions and personal interpretation of publicly available information.

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Frontier Mole
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Re: Co director investment query

Post by Frontier Mole » Sun Feb 14, 2021 5:41 am

I have seen attempts at bolstering the migrants investment pot to meet the investment threshold is this manner on a couple of occasions. The “on behalf of” investment can only be brought into the pot if the money is an outright gift to the migrant personally and the migrant then decides to use the funds in the usual way to add to their directors loan or buy more share capital.

There can be no comeback or legal remedy for the gifting individual to claim the gift back. If there is the slightest of indication that this is the case, the scheme would fail. It is dubious activity at best.

There is also the money trail... particularly if there is a co-director involved. That usually gets messy and is readily questioned.

Other points fall out of the gifting... it points to the fact that the migrant did not have the funds in the first place and that the investment threshold was not met from the migrants funds alone. There is also the slight matter of the suspicion that the gifting individual is facilitating the leave to remain by participating in essentially an immigration fraud.

In my experience these attempts fail and end in tight refusals that easily withstand legal challenge.

ParulPatel
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Re: Co director investment query

Post by ParulPatel » Tue Feb 23, 2021 2:57 am

marcnath wrote:
Wed Feb 10, 2021 1:17 pm
ParulPatel wrote:
Wed Feb 10, 2021 10:48 am
Dear Sirs,

I have a query. I have set up a business in the UK. Can my co-director (who is not my team member) be a third party investor in my business.

Are there any rules preventing him to loan any monies to me or invest directly into the business on my behalf.
There is no impact of that on your immigration applications - it will not violate any immigration rules
Hello Marcnath,

Thank you for your feedback on this issue. To be specific, I am intending to rely on the funds invested in my business, by my co-director (who is also a third party sponsor). The monies were unfortunately transferred into the business from his account directly. Saying that, he was also a third party sponsor in my initial Tier 1 application showing all of the funds in his account (£200k).

I submit that the HO has already accepted that he would lend me monies in my business, which has taken place. The only difference in this case is that the HO didn't know that he would be a co-director too in the business that I would set up.

Saying that this investment has already happened and I have moved from being able to undo this. Being in the state that I am, what should I show in my accounts / draft accounts to be able to have this investment counted twoards the points calculation.

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marcnath
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Re: Co director investment query

Post by marcnath » Tue Feb 23, 2021 2:35 pm

ParulPatel wrote:
Tue Feb 23, 2021 2:57 am
marcnath wrote:
Wed Feb 10, 2021 1:17 pm
ParulPatel wrote:
Wed Feb 10, 2021 10:48 am
Dear Sirs,

I have a query. I have set up a business in the UK. Can my co-director (who is not my team member) be a third party investor in my business.

Are there any rules preventing him to loan any monies to me or invest directly into the business on my behalf.
There is no impact of that on your immigration applications - it will not violate any immigration rules
Hello Marcnath,

Thank you for your feedback on this issue. To be specific, I am intending to rely on the funds invested in my business, by my co-director (who is also a third party sponsor). The monies were unfortunately transferred into the business from his account directly. Saying that, he was also a third party sponsor in my initial Tier 1 application showing all of the funds in his account (£200k).

I submit that the HO has already accepted that he would lend me monies in my business, which has taken place. The only difference in this case is that the HO didn't know that he would be a co-director too in the business that I would set up.

Saying that this investment has already happened and I have moved from being able to undo this. Being in the state that I am, what should I show in my accounts / draft accounts to be able to have this investment counted twoards the points calculation.
There is nothing that prevents a co-director from providing funds. The key point is that the funds must be provided to you/on your behalf. If the co-director (or any other third party) is an investor in your business, then it can't be used as evidence of your investment. The letter he gave during your application process would have already said that.

So, all documentation you provide - accounts, director's loan, share issuance, etc. should all show that the money is yours (irrespective of where it came from).

If it is a Director's loan, then the business statement should show your name against each transaction by which the money was transferred (which would be expected since it was investment on your behalf) - that will satisfy the requirement.

If it was invested as a share capital, the accounts need to show that those shares are in your name.
My comments are in no way meant to be advisory. I have no professional knowledge of immigration. These are based on my own experience, convictions and personal interpretation of publicly available information.

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