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Post Info TOPIC: New Company Share Capital & withdrawl after 2 weeks.. Dobule entry confusion
stokeyjay


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New Company Share Capital & withdrawl after 2 weeks.. Dobule entry confusion
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Hello Gus and gals..

I need help I got mind block.

A company has been incorporated  with 500 share @ £1000. 

there are 2 shareholder 50% each ie 250 shares each..

Now the tricky part.

there was condition that there must be £500,000 in bank on company creation and fund can be withdrawn after 2 weeks.

Shareholder 1 has no money to pay yet.

Shareholder paid £500,000 into bank

Both are directors as well.

Company was incorporated.

I did Dr Bank, Cr Share capital

 

After two weeks the share holder 2 withdrew the £400,000

 

I did Cr Bank, Dr Director2 Loan account (assets)

 

I still think I am missing something.. like Paid-up capital & unpaid capital accounts (keeping in mind Shareholder 1)

 

I just need a bit of push, anybody please.. Thanks in advance.

 

 

 

 



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matt123


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Is it £1000 per share? Or 500 £2 shares?

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Matthew
stokeyjay


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£1000 per share i.e 500 share worth Half million.

Thanks



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matt123


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We'll in that case the £500,000 paid up capital should stay in the company. The DLA is effectively over drawn by £400,000 now.

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Matthew
matt123


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What's the reason behind the £500k capital? Could they not have £1k capital and loan the company £499k?

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Matthew
Leger


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Ouch!!  Is it too late to amend Matt?  A costly mistake for the Company otherwise.



-- Edited by Leger on Tuesday 19th of January 2016 10:18:53 PM

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John 

 

 

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Shamus


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Yes but get a chartered or solicitor to do it for you as it requires either a solvency statement or court confirmation along with companies house form SH19.

Considering the amount of money that we are talking about here I don't see hiring a specialist will be an issue.



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Shaun

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stokeyjay


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Thanks all for your replies.

I think it is correct time to give some background details that may help others in future...

The company is in an overseas TaxFreeZone and to incorporate it was a condition to have minimum 500K in share capital @1000 per share and money in the bank.. once incorporated the money can be withdrawn after a month..


two friends started it hence 250 shares each i.e 50% each.. however only one friend contributed 500k (borrowing 400k bridge loan with 5,000 interest from other friends that was paid back after a month leaving his 100k own investment in the company now)


We'll in that case the £500,000 paid up capital should stay in the company. The DLA is effectively over drawn by £400,000 now.

Thanks Yes I actually did it that way.

 

However  I want to classify the Shareholder 1 unpaid share capital (for shareholders book) who did not contribute any money yet and shareholder2 actually paid all the 500K however he withdrew 400K to pay back to his friends?

 

As all the share is paid-up so I have balanced the books as below.. I hope this is OK and make sense now ;)

Bank

Dr SC of SH1- 250k

Dr SC of SH2 - 250k

Share capital (sc)

Cr SH1- 250k

Cr SH2 - 250k

 

After ONE month

Bank

Cr DLA - SH1 - 250k

Cr DLA - SH2 - 150k

Cr P&L-Interest Exp 5k

Assets

Dr DLA - SH1 - Bank- 250k

Dr DLA - SH2 - Bank - 150k

P&L

Interest Exp.

Dr Bank 5k



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Shamus


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Get an chartered accountant involved Jasmine.

If you are adamant that you want to do this yourself then at least pose your question on Accountingweb. They will give you a variant on Matts answer above but they may also be willing to help you through this where, whilst no offence is intended here to anyone, I don't think that people here should attempt to answer this as its a potential very costly issue for your client if things go wrong.

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Shaun

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Leger


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Just a quick question, is it a UK Ltd Company or an offshore one? .  If you ask the question on accountingweb I would clarify that point.

I agree with Shaun though, it would pay to get a chartered accountant on board with this.



-- Edited by Leger on Wednesday 20th of January 2016 09:10:30 PM

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John 

 

 

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stokeyjay


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Thanks guys...

It is in UAE.. no UK link

They already have an accountant/auditor over there. I am only helping one of the shareholder here to get a visual picture of their financials and helping him how record daily transactions etc..

Thanks again for all your input..

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Cheshire


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Hi
Has the shareholder who is UK based not got an Accountant? Would suggest they do get one asap.....Chartered/tax. They should also be able to give you handle on how this would look in the accounts.

Need to fully check the position in terms of the loans too, the way I understood you was that the loans were personal to one shareholder, therefore you cannot put the interest through as a business expense. If it was a loan to the business then on what basis/has the one shareholder then got the right to withdraw those funds fully.

Lots of potential 'issues' with this one.


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 Joanne 

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Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

You should check out answers with reference to the legal position
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