Results 1 to 8 of 8

Thread: Resolution for investment money

  1. #1
    just me duncan drennan's Avatar
    Join Date
    Jun 2006
    Location
    Cape Town
    Posts
    2,642
    Thanks
    119
    Thanked 94 Times in 77 Posts

    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?
    [SIGPIC]Engineer Simplicity[/SIGPIC]
    Turn ideas into products | The Art of Engineering blog

  2. #2
    Moderator IanF's Avatar
    Join Date
    Dec 2007
    Location
    Jhb
    Posts
    2,679
    Thanks
    197
    Thanked 529 Times in 405 Posts
    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!

  3. #3
    just me duncan drennan's Avatar
    Join Date
    Jun 2006
    Location
    Cape Town
    Posts
    2,642
    Thanks
    119
    Thanked 94 Times in 77 Posts
    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?
    [SIGPIC]Engineer Simplicity[/SIGPIC]
    Turn ideas into products | The Art of Engineering blog

  4. #4
    Moderator IanF's Avatar
    Join Date
    Dec 2007
    Location
    Jhb
    Posts
    2,679
    Thanks
    197
    Thanked 529 Times in 405 Posts
    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!

  5. #5
    Site Caretaker Dave A's Avatar
    Join Date
    May 2006
    Location
    Durban, South Africa
    Posts
    22,741
    Thanks
    3,322
    Thanked 2,688 Times in 2,265 Posts
    Blog Entries
    12
    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.

  6. #6
    just me duncan drennan's Avatar
    Join Date
    Jun 2006
    Location
    Cape Town
    Posts
    2,642
    Thanks
    119
    Thanked 94 Times in 77 Posts
    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.
    [SIGPIC]Engineer Simplicity[/SIGPIC]
    Turn ideas into products | The Art of Engineering blog

  7. #7
    Moderator IanF's Avatar
    Join Date
    Dec 2007
    Location
    Jhb
    Posts
    2,679
    Thanks
    197
    Thanked 529 Times in 405 Posts
    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
    Join Date
    May 2006
    Location
    Durban, South Africa
    Posts
    22,741
    Thanks
    3,322
    Thanked 2,688 Times in 2,265 Posts
    Blog Entries
    12
    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

Similar Threads

  1. [Article] Your website is a waste of money!
    By Chatmaster in forum Marketing Forum
    Replies: 37
    Last Post: 28-Nov-10, 03:00 PM
  2. Plastic bag money
    By duncan drennan in forum South African Politics Forum
    Replies: 1
    Last Post: 12-Nov-07, 09:48 PM
  3. Do You realy need Money to make Money?
    By Theuns" in forum MLM Industry Forum
    Replies: 8
    Last Post: 22-Aug-07, 11:57 PM
  4. the thought of money encourages isolation
    By duncan drennan in forum General Business Forum
    Replies: 0
    Last Post: 24-Nov-06, 12:05 PM
  5. Project "Get your money from SETAs"
    By I Robot in forum News Archive
    Replies: 1
    Last Post: 27-Jun-06, 04:20 PM

Tags for this Thread

Did you like this article? Share it with your favourite social network.

Did you like this article? Share it with your favourite social network.

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •