Im relatively new to bookkeeping and am looking for some advice on the following
My clients, a husband and wife have up till now been running their Ltd company as joint directors, they have just informed me that the husband is being removed as director and is transferring his shares to his wife. Im not sure of the reason for this but its nothing acrimonious - they are not splitting up, so possibly on the advice of their accountant.I just need to clarify if theres anything I need to do generally from a bookkeeping point of view because of this. Some things have sprung to mind - The directors loan account is in joint names, so is it OK to continue posting to this account once the husband has been removed as director or are there any adjustments etc that need to be done to this account first? Also if as currently happens the husband still sometimes pays for business expenses out of his own personal funds how can these be posted in the accounts (crediting to the directors loan account does not sound right as he will no longer be a director)?
The husband also draws a directors salary (credited to DLA) so this will obviously need to stop but is there anything else that would need to be done surrounding this?
A
ny advice at all you can give on the above points or in general would be much appreciated.
in your question you are mixing up owner and director.
The company is a totally seperate legal entity to it's owners.
The directors have a fiduciary duty of care for the company as a parent does for a child but at no stage should one think of the company as being the directors in the same as one should not think of a babysitter being a childs parents.
If the shares are transfered to a single owner then the other director who is no longer an owner ceases to have rights to a share of dividends. Providing that they legitimately work for the company then they will still receive their salary.
My assumption here is that it is more tax effective for the wife to receieve 100% of any dividends paid and that is why the transfer of shares has been made.
From your question it seems that only the owner interests have changed and as a bookkeeper there should be no major changes that you need to make as salaries and expenses will remain as at present with only the division of dividends changing.
Any money introduced to the company by a director (such as paying expenses personally) is an introduction of capital. Probably better if you try and convince the director concerned to have a company credit card (for company expenses only). This will be taken in it's entirety from the company by direct debit each month.
kind regards,
Shaun.
P.S. Amended because of my inability to spell (doh). Give me numbers over words any day of the week... Also added the babysitter line.
-- Edited by Shamus on Thursday 10th of February 2011 10:35:57 AM
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Will need to get the husband and wife to agree the split of the directors loan at the date when the husband has resigned as director. Though this is something for the accountant rather than you to worry about. Either the wife will take on the full balance or some will be given to the husband which given he is no longer a director will be transfer to other creditors.
If the husband continues to pay for business expenses using personal funds then given no longer director shouldnt be credited to DLA but to other creditors ie
Dr Expense Cr Other Creditors
Why is the salary of the husband credited to DLA??? or is the tax free salary put through each year ie £4715 per year. If it is then defeats the purpose of transferring the shares as would be able to take dividends up to 40% band (assuming they dont have any other income). You would expect if someone is taking a salary that it is credited to bank.
Think there are a few things for the accountant to be considering but from your viewpoint i would open a separate liability account for the husband and post anything to that account which you would have previously posted to DLA when he was a director.
I have received copies of the documentation that my clients sent to their accountant, one is a TM01 Termination of Appointment of Director form and the other is a stock transfer form, so from this it would appear that the husband is no longer to be an owner or director. In view of this would it change your advice above.
Hi Richard - it shouldn't do, as your original questions stated: "they have just informed me that the husband is being removed as director and is transferring his shares to his wife". The TM01 is to remove him as a director, the STF is to transfer the shares.
