What are the actual terms for shareholders loan repayments?
Does solvency and liquidity need to be passed and a shareholders resolution be drawn up or is this looking too deep into compliance?
What are the actual terms for shareholders loan repayments?
Does solvency and liquidity need to be passed and a shareholders resolution be drawn up or is this looking too deep into compliance?
Largely yes.
Look at CIPCs take on it:
http://www.cipc.co.za/index.php/mana...liquidity-test
Hi
The first question is what was agreed with the shareholders and is this a bona fide loan repayment. A lot of times companies and shareholders agree that shareholders loans are repayable based on some conditions so it is important that a loan agreement be drawn with the shareholders. Please refer to this agreement as guidance. If the repayment terms and conditions are at arms length and not masking dividends repay as agreed. The only limitation according to the company's act is the declaration of dividends. For dividends you have to do the liquidity and solvency tests.
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