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Investment by director's loan or share capital

Only for UK Tier 1 (Entrepreneur) points system

Moderators: Casa, JAJ, ca.funke, Amber, Zimba, vinny, Obie, EUsmileWEallsmile, batleykhan, geriatrix, John, ChetanOjha, archigabe, push

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Newuser111
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Joined: Tue Apr 28, 2020 11:20 pm

Investment by director's loan or share capital

Post by Newuser111 » Tue Apr 28, 2020 11:29 pm

Dear Zimba and Marcnath,

I read a lot of your responses and really appreciate your efforts. I have an urgent question to ask for your advice. Really really need your advice. Thank you!

My team partner and I are going to apply extension on 20th May. Our investment was quite complicated.

1. We invested around 20k by director's loan before 2017. But we are not sure these investment is correct or not (spent on behalf of business, rather than transfer to business). Therefore we wanted to convert this part to share capital. And make new investment.

2. We had invested 30k as director's loan between 08/2019- 09/2019 (our account annual end month is Sep), which could show on annual account of year 2019.

3. We invested another 20k on 02/2020, which could not show on annual account of 2020 (2020 account is not due yet). We are not sure whether half-year management account is acceptable for HO.

The question is we don't know how to define our investment,by director's loan or share capital, here are our concerns:

1. Because our latest investment could not show in the 2020 annual account, should it be defined as share capital? If it should be defined as share capital, then how to prove we have the equal control of the company? BY agreement signed by both of us? Because all the latest 20k was transferred under my partner's name through our joint account. Could our accountant make our share capitals equal?

2. Or maybe define it as director's loan, then how to prove the latest director's loan is valid and acceptable for HO as investment? Is that enough to show 2019-2020 half-year management account, bank statement of both joint account and business account and agreement rather than a full account?

3. Or should we put 30k + 20k all to share capital? I thought share capital is not showing enough confidence to our company's future, so always against this option.

4. Or 30k director's loan + 20k share capital? But if we don't want to use the 20k investment made in 2017, how could we clarify?

We really need your advice dear Zimba and Marcnath. Thank you very much.

Looking forward to hearing from you.

Best regards,

Rob

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marcnath
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Location: Milton Keynes

Re: Investment by director's loan or share capital

Post by marcnath » Thu Apr 30, 2020 7:12 am

First, if you have read the guidelines properly, you would have seen that management accounts are equally acceptable. So yes, half year accounts, as long as they are prepared and certified by qualified accountants are acceptable.

As for the rest, it does not matter what form of investment you make. Share capital needs lesser documentation than Director's loan. I have never understood why HO allowed Director's loans and why it matters to any entrepreneur who is into it for the long term. But, bottom line, HO allows either, so it does not matter.
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.

Newuser111
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Posts: 2
Joined: Tue Apr 28, 2020 11:20 pm

Re: Investment by director's loan or share capital

Post by Newuser111 » Fri May 01, 2020 7:56 pm

Dear Marcnath,

Thank you very much for you reply. I greatly appreciate your help.

I realised that I shouldn't start a new topic in this forum after reading the policy. My colleague told me that she found I created a new topic and it shouldn't be there, so she repost my question under the old 'Director's loan agreement and fund transfer' topic page 12. I apologize for any inconvenience I’ve caused. Please delete my new question or help me to move my topic under the correct group. Sorry I couldn't clarify this earlier because I was forbidden to post a reply.

Thanks again.

Best regards,
Rob

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