Recovering Unsecured Loan

weshtawake

I am a Director of a company with a 40% shareholding. I advanced/loaned €50k. odd some years ago to my fellow director. This money was used for professional fees to secure planning permission on a site (now zoned industrial from agricultural). The Loan is shown in the Balance Sheet of the company but the site is not valued on the Balance Sheet and is owned by the fellow Director personally and so this is basically an unsecured Loan.

Given this situation is there any way I can force the sale of the site to recoup my money or how might I get my money back??

Peregrinus

If you advanced the loan to your fellow director, how come it shows up on the balance sheet of the company?

And have you, as a director, adopted account for the company showing the loan as a liability of the company? 'Cause, obviously, that could be awkward if you now assert that loan was a liability of your fellow director's all along.

Is there any documentation associated with this loan? Like a loan agreement? An exchange of letters? Anything?

weshtawake

Sorry for confusion!
The Loan was to pay for the professional fees (including VAT) and Planning Permission application to Sligo County Council which were issued to the company so were NOT to fellow Director. There was no paperwork as such to reflect the Loan but obviously there are invoices to back up/validate the payments.
As I said previously there is no valuation included in the Balance Sheet for the site as asset - the professional invoices are charged to the P & L resulting in losses in the P & L and Balance Sheet which are matched by the Loan balance in the Balance Sheet.

weshtawake

weshtawake wrote: »

Sorry for confusion!
The Loan was to pay for the professional fees (including VAT) and Planning Permission application to Sligo County Council which were issued to the company so were NOT to fellow Director. There was no paperwork as such to reflect the Loan but obviously there are invoices to back up/validate the payments.
As I said previously there is no valuation included in the Balance Sheet for the site as asset - the professional invoices are charged to the P & L resulting in losses in the P & L and Balance Sheet which are matched by the Loan balance in the Balance Sheet.

Sounds like a mess.
The company has planning permission and debts related to that, but doesn't own the land?

Did you understand that the loan was to the company or to him personally?

If you have signed off company accounts showing the loan outstanding but not owing the land, and you don't have any further paperwork, I don't see how you could force the sale of land the company doesn't own and has no claim over.

Rayne Wooney

weshtawake wrote: »

Sorry for confusion!
The Loan was to pay for the professional fees (including VAT) and Planning Permission application to Sligo County Council which were issued to the company so were NOT to fellow Director. There was no paperwork as such to reflect the Loan but obviously there are invoices to back up/validate the payments.
As I said previously there is no valuation included in the Balance Sheet for the site as asset - the professional invoices are charged to the P & L resulting in losses in the P & L and Balance Sheet which are matched by the Loan balance in the Balance Sheet.

There’s some vital information missing from you before anyone can help you to be fair.

Did you pay the 50k into a company bank account and then you/other director paid the fees?

Or did you pay it to the director’s personal bank account and he paid legal firm/county council?

Or did you pay directly to legal firm/county co from your personal account and they issued invoices to the company?

The outcome depends on the answer to the above questions and what documents were signed to say exactly what happened at the time also.

Did the other director sign off on those accounts is another major question too.

Victor

There may be some form of solution in equity - you did something for the benefit of others that someone wouldn't normally do unless there were specific intentions. https://en.wikipedia.org/wiki/Equity_(law)

You need a solicitor.

weshtawake

Thanks for your interest Rayne!
The answer to your question is the third option i.e. invoices (including VAT) were issued to the company and I paid those invoices out of my personal bank account.
The company actually did not have a bank account!!


I am wondering what the significance of this is as opposed to the other 2 potential options you listed??

weshtawake

Just to complete Rayne's queries - yes the other Director did sign off the accounts.

Rayne Wooney

weshtawake wrote: »

Thanks for your interest Rayne!
The answer to your question is the third option i.e. invoices (including VAT) were issued to the company and I paid those invoices out of my personal bank account.
The company actually did not have a bank account!!


I am wondering what the significance of this is as opposed to the other 2 potential options you listed??

What relationship does the company have with the site? Is the company ever going to make money from the site?

If the company isn’t going to gain anything from the transaction then the 50k is just personal expenses for the director paid by the company and he has essentially evaded tax on this if it wasn’t declared.

If you making revenue aware of this isn’t enough to get him to agree to repaying then you need to contact a solicitor. Has he not agreed to repay anything at all?

3DataModem

Your fellow director has taken company money and availed of it personally (by using it in the services of a personal property).

In which case, he owes a lot of income tax on this benefit in kind (and the company owes employers PRSI). At current tax rates will be close to 50k total, depending on his other income.

or

He needs to repay the "directors loan" back to the company plus a lot of interest - its 13.5% per annum minimum, after which the company can repay you. Then you have a 40% share of the cash sitting in the company account