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Thread: Resolution for investment money

  1. #1
    just me duncan drennan's Avatar
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    Resolution for investment money

    I would like to invest some of my company's money with myself (in my bond). The main reason is so that the company can get some benefit out of money that is sitting idle (not large amounts), and not have to pay extra banking fees while getting a reasonable interest rate and still having immediate access to the money if needed.

    What should be in the resolution to do this? How about this:

    "At a meeting of the board of directors it was resolved that any excess funds would be invested with Duncan Drennan at an interest rate of prime less 6%."

    From an accounting side it is just a matter of me presenting a statement to the company once a month. I would then set it up as an investment account in my accounting package.

    Anything else that needs to be in the resolution?
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    Moderator IanF's Avatar
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    Duncan
    Go get some Tax advice as this may be seen as a deemed dividend. So be careful.
    Only stress when you can change the outcome!

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    just me duncan drennan's Avatar
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    Quote Originally Posted by IanF View Post
    Go get some Tax advice as this may be seen as a deemed dividend. So be careful.
    What is a deemed dividend?
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    Moderator IanF's Avatar
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    Quote Originally Posted by duncan drennan View Post
    What is a deemed dividend?
    This is where money is advanced to members/shareholders instead of declaring a dividend. So you could be taxed, I am not up to date with this so you need the proper advice.
    Only stress when you can change the outcome!

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    Site Caretaker Dave A's Avatar
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    I was thinking this morning that it might be treated as a loan by SARS - in which case they have their own rate used for tax purposes. But in toying with the consequences of that, I still didn't see any merit in being guided by that rate in determining the interest returned on the investment.

    In fact, going with the SARS loan rate would be tantamount to an AOG

    Ian is right; it might be a little more messy than it looks and if you are dealing with big money, it would be worth getting tax advice on it. But if it is fairly small, just don't spend the savings until the tax bill is finalised
    But I assume the idea at this point isn't to spend the savings anyway.
    The trouble with opportunity is it normally comes dressed up as work.

  6. #6
    just me duncan drennan's Avatar
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    Well, this would not affect any shareholders, as I am not directly one. The shares are held in a trust. I am a director of the company. So from that perspective I don't think it could be considered a deemed dividend.

    AOG? Act Of God? Or something else?

    If SARS considered it a loan, then what would the implications be? What is SARS' loan rate?

    The amounts we are talking about are small. Just trying to optimise where money (such as VAT due) lies in waiting. If the amounts were large enough to make a money market account worthwhile, I would probably follow that path to avoid any potential governance issues.

    I will chat to my accountant though. Seems prudent.
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    Moderator IanF's Avatar
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    Quote Originally Posted by duncan drennan View Post
    AOG? Act Of God? Or something else?
    Admission of Guilt
    Good idea to talk to your accountant.
    Only stress when you can change the outcome!

  8. #8
    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by IanF View Post
    Admission of Guilt
    Good idea to talk to your accountant.
    Agreed on both counts

    What makes it even more interesting from a tax point of view is that the first x interest is tax free. I know I started going round in circles in trying to work out any optimisation strategy on this.

    x = it's too late in the evening to look this up now
    The trouble with opportunity is it normally comes dressed up as work.

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