Injections of funds by shareholder to subsidiary

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Giannisk
Posts: 1
Joined: 28 Feb 2022, 21:29

Injections of funds by shareholder to subsidiary

Post by Giannisk »

The shareholder of the Company send funds every month to finance the operational expenses of the Company, there is no documentation for these transfers. My question is how these funds should be treated in the books of the Company?

1) Capital contributions ( Equity reserves)
2) As a loan
3) Just to be recorded to a shareholder current account
JRSB
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Posts: 864
Joined: 01 Mar 2020, 01:10
Location: UK

Re: Injections of funds by shareholder to subsidiary

Post by JRSB »

even if no paperwork, what is the intention of management and what to they say to the sub? may be worth putting some paperwork in place. assume there's no interest charged so may be easier in practice to treat as capital, but then you have impairment tests against it to consider. is there a sensitivity on either party's balance sheet position etc
Leo
Posts: 537
Joined: 05 Apr 2020, 22:31

Re: Injections of funds by shareholder to subsidiary

Post by Leo »

Shareholder current account if it's to finance the business activities of the company.

Paperwork is needed to record in capital I'd say.
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