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Loans/ Debt to the owners

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Guinness Guzzler said:
I completely agree with you in general. Using made up figures if a club is worth £10m, a director puts £1m in but its a loan so they'd get £1m back, then the value would still be £10m, making it neutral. That sort of makes sense (albeit I'm still confused, I don't pretend to be any sort of a finance expert).

Is the issue not, however that Donald says he's putting money back and that's repaying the parachute money? Again all made up figures here but if he owes the club £20m, puts £20m in, says that's him paid it back, but in doing so there's a £20m loan to him, surely that just means he hasn't paid it back? The initial £20m doesn't show as owing because he removed the requirement to pay it back so it wouldn't be factored into the initial value?
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I would say that loaning the club money is not the same as paying it back. But, technically he doesn't have to pay it back.
 
It makes no difference.

The club they own, owe money to them. It's a frequently used accountancy method known as a directors loan.

Can anyone explain why they think it's an issue?
 
Guinness Guzzler said:
Technically, but he has consistently said that he will pay it back, which this would suggest he isn't
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It's still putting money into the club. The issue would only arise if he then took it back out, but if they put it in as shares, they could take a future dividend. It's all semantics. The key point is money is going in.

This method can be used for a number of reasons.
 
Hep said:
It's still putting money into the club. The issue would only arise if he then took it back out, but if they put it in as shares, they could take a future dividend. It's all semantics. The key point is money is going in.

This method can be used for a number of reasons.
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tell us those reasons?
is it to make them a secured creditor in the event of administration? thats why its norally done...?
 
Guinness Guzzler said:
If it creates a loan owing to him I can only assume he will take it back out. I don't think he's earned any sort of benefit of the doubt here tbh
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ellis short did it as a loan rather than shares and didnt take it back out..
the historic reason to do it..is to make yourself a creditor in the event of administration,,


none of the above post should be interpreted as a defence of donald BTW..this is not defesnible and he doesnt deserve the benefit of the doubt..
 
kildaremackem said:
tell us those reasons?
is it to make them a secured creditor in the event of administration? thats why its norally done...?
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It could be to offset profit by taking a % on the loan to reduce tax liabilities and then add/reloan the % to the club.

A director's loan can be secured or unsecured. However, if the club was going into administration, footballing creditors would be paid first. So, I doubt they've done it for that reason.
 
kildaremackem said:
ellis short did it as a loan rather than shares and didnt take it back out..
the historic reason to do it..is to make yourself a creditor in the event of administration,,


none of the above post should be interpreted as a defence of donald BTW..this is not defesnible and he doesnt deserve the benefit of the doubt..
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That sounds fair enough then. So basically if he does it and doesn't factor it into a selling price then it's okay, but if he does factor it in then he's basically trying to get the parachute money back again?
 
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