Avoiding those awkward client conversations

What a difference a security interest can make in liquidation.

As we approach the end of financial year, it's time to remind advisors of an important matter which is often overlooked. If remedied, however, it may well avoid that awkward moment when your client asks: "why didn't you tell me that"?

So, what exactly is "that" and why is it important?

Advising your clients to secure loans made to a company (referred to as related party credit loan accounts) is a process easily put in place, usually via a solicitor. If implemented properly, it may provide the secured party with an advantage over unsecured creditors in the event of the company being placed into liquidation.

Related Party credit loan accounts arise under variety of circumstances including advances of monies to assist with working capital or the acquisition by the company of a new business or other assets. Credit loan accounts may also arise from dividends which are declared but remain undrawn, or