Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA LW Exams › Control of Directors on Loans, Guarantee & Securities
- This topic has 5 replies, 2 voices, and was last updated 2 months ago by MikeLittle.
- December 29, 2022 at 2:21 am #675162
I have a couple of confusion about this subject:
1. Is a situation involving less than £5k an exception for the statute of no securities, guarantee and loans to directors, and do not apply?
2. You mentioned that a coy may give these finances to e.g child A, B or wife who are family members of a director who are also members of the company, equally, it was stated that the same rule of no finances to directors apply to connected persons – which I believe means children, wife who are members of d coy and family of a director?.. this quite contradicts and isn’t clear.
3. Loans by money lending institutions for purchase or improvement of a director’s residence, allowed up to £100k – is this also an exceptional case where companies can finance without members approval?
4. In general, how does the rule apply – you illustrated that companies cannot lend to a director of itself or of its holding or parent company but they can lend to connected persons?
Thank you, Sir.December 29, 2022 at 6:58 am #675164
You post ‘I have a couple of confusion about this subject:’ and then ask 4 questions! Have you passed the FA exam? 🙂
You also ask about passing the F4 exam. The ‘F’ references disappeared some years ago. The equivalent title for the exam is now ‘the Law paper’ or ‘the Law exam’
Now to your questions!
1. YES, this IS an exception. On the basis that, under £5,000, nobody cares
2. You need to be better aware of the fundamental issue of the difference between relevant and non-relevant companies. A non-relevant company can pretty much lend money, guarantee ….. to anyone EXCEPT a DIRECTOR, so loans to spouse, children and so on are no problem. It’s only when we’re looking at relevant companies that connected persons are included
3. Yes, a loan by a money-lending company to a director up to £100,000 to buy or improve the director’s main or only residence is an exception to the general principle
4. So long as we’re not looking at a ‘relevant group’ then a company CAN lend to the spouse of a director of its holding company. Again, the vital issue of ‘relevant’ and ‘non-relevant’ companies is the key
Is that better?December 30, 2022 at 2:13 am #675179
Thanks a lot Mike.
I’m sorry, I got acquainted to the ‘F’ reference through my friends who have qualified years back (probably when the ‘F’ was still relevant).
Thanks for letting me know how to go about it now!
I was exempted from all the ‘applied knowledge’ exams – I guess now FA, MA, BT (not to use ‘F’ again…. lol)
Thanks for the answers, it provides better clarity. However, could you help me explain better on what ‘relevant companies’ and ‘non-relevant companies’ are?
Thank you, Sir.December 30, 2022 at 7:19 am #675181
‘Relevant’ and ‘non-relevant’ are statutorily defined. Very basically (enough for our purposes) a company is a relevant company if it is a public company or is a private company member of a group of companies in which at least one other company is a public company
And remember, not to use the ‘f’ word in future posts!
Have a good 2023 🙂January 2, 2023 at 2:40 pm #675303
Thank you MikeJanuary 2, 2023 at 9:09 pm #675320
You’re very welcome
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