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Thread: HELP - transfer of member loan account

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    HELP - transfer of member loan account

    I am sort of still part of a CC in Gauteng - members were distributed 33%/33%/34% the 34% being an Old Partner of mine, so we just gave him the extra 1 percent.
    For the lack of naming people lets just say Jack, John and Jill.
    Jack being the 34% just upped, resigned and left recently -supposedly just signed over his 34% to John. - John now thinks he owns the Company.

    John now wants to buy me out(pay me my dues)(Jill) which is OK, and I am ready to sign and get the %$^&*outa there
    However Jack left a Directors Loan Account in debit behind. Because I (Jill) invested the majority of the money into the Business, I have requested that in nthe sell agreement John CEDE Jacks Directors Loan account to me. He advises that due to accounting principles and Tax rules he cannot - CAN SOMEBODY ADVISE IF AT ALL POSSIBLE.

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    Diamond Member Justloadit's Avatar
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    Firstly do you have a members share holder agreement?

    The agreement will layout the manner in which the shares are to be distributed or sold.
    The shares in a C.C. must be offered to everyone as far as I know, and the remaining members then decide via a minuted meeting the outcome.
    If no agreement, then I suggest a lawyer get involved before a he said she said shooting match begins. The cost of the lawyer will be miniscule when compared to what can go south in this instance.
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    Diamond Member Justloadit's Avatar
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    Another point, the change of shares for a C.C. require it to be registered at CIPRO not sure of the new name, which requires your signature as acceptance aone of the members of the C.C. so there is a lot more to it than simply giving the shares away.

    A power of attorney could be given by 'Jack' and the voting power given to 'John', but again this requires a munted meeting by the members of the CC to accept this change. There is a lot involved in a CC, and hence the reason to get a lawyer involved.
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    Quote Originally Posted by sablelodge View Post
    John now thinks he owns the Company.

    John now wants to buy me out(pay me my dues)(Jill) which is OK, and I am ready to sign and get the %$^&*outa there
    However Jack left a Directors Loan Account in debit behind. Because I (Jill) invested the majority of the money into the Business, I have requested that in nthe sell agreement John CEDE Jacks Directors Loan account to me. He advises that due to accounting principles and Tax rules he cannot - CAN SOMEBODY ADVISE IF AT ALL POSSIBLE.
    For all intense purposes, John essentially does own the company. Why do you want the loan account ceded to you? Can't you get a clean payout?

    I cannot think of any tax rules or accounting issues which stop him ceding a loan account. Ask him to explain which ones he is referring to. The only thing is that Jack's loan probably still belongs to Jack, so he is the one who has to make the cession. I can't see how John could do that on his behalf.

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