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2nd December 2003, 11:31

Bradley,

A loan in excess of 5k is indeed a criminal offence under S342(1) and S342(2). Punishable by 2 years inside, a fine and disqualification as a director. I think it is S330 that defines the limits etc.

But I didn't say it wasn't.

In fact I agreed it was.

What I did say was that in practice it needs a wounded shareholder to file a complaint. If I had a directors loan in excess of 5k you could not report it (actually of course you could but nothing would happen because you were not damaged). My other shareholders could report it, and if they could show damage the SFO/DTI would prosecute (well in theory).

The same is of course true for most - but not all - offences under the companies act. They are designed to protect other shareholders interests from miscreant directors.

It is also at least mildly interesting to note the examples on the IR web site of the tax treatment of directors loans. A lot of large examples and no mention of the technical illegality.

It is, of course, possible to engage in some legitimate tax planning via recurring loans, but the IR don't like it and will often challenge. It is also possible to loan somebody who is a non-director as much as you want. The connected persons type of rules do not apply, however lending ones partner a large sum will most likely cause challenge that it is a loao to oneself - although there is no guarantee it will succeed.

Simon.

2nd December 2003, 11:31	#5
ASB Posts: n/a	S342 CA 1985 Bradley, A loan in excess of 5k is indeed a criminal offence under S342(1) and S342(2). Punishable by 2 years inside, a fine and disqualification as a director. I think it is S330 that defines the limits etc. But I didn't say it wasn't. In fact I agreed it was. What I did say was that in practice it needs a wounded shareholder to file a complaint. If I had a directors loan in excess of 5k you could not report it (actually of course you could but nothing would happen because you were not damaged). My other shareholders could report it, and if they could show damage the SFO/DTI would prosecute (well in theory). The same is of course true for most - but not all - offences under the companies act. They are designed to protect other shareholders interests from miscreant directors. It is also at least mildly interesting to note the examples on the IR web site of the tax treatment of directors loans. A lot of large examples and no mention of the technical illegality. It is, of course, possible to engage in some legitimate tax planning via recurring loans, but the IR don't like it and will often challenge. It is also possible to loan somebody who is a non-director as much as you want. The connected persons type of rules do not apply, however lending ones partner a large sum will most likely cause challenge that it is a loao to oneself - although there is no guarantee it will succeed. Simon.