I would like to bring in a few friends as shareholders in my start-up pvt. ltd co. for the purpose of getting their loan at a fixed interest or a profit linked interest rate. I and my dad are the directors and existing shareholders with a capital of Rs.1 Lakh.
1. I presume DIN nos. are not necessary for these new shareholders.
2. I'm planning to sell a part of my existing shares to these 5-7 people with one share each just for the sake of compliance. ( @ Rs. 500 per share)
What is the procedure to execute this share sale deed ... is a normal stamp paper agreement with 2 witnesses sufficient for the sale ? Should this sale be intimated to the RoC ?
3. After this I would like to make a loan agreement with each of the new shareholders - for an amount ranging from 3-5 Lakhs per person at a rate of 12% monthly reducing balance.(The interest will also get compounded) - Is there a restriction on the interest rate and period of payment ...? I would like the payment to be flexible - not exactly every month but as and when profit is generated (as the lenders are fine with this).
4. How should the lender treat this interest and principal payment received periodically from the company ..? They are salaried people working in a company - probably in the higher taxable range. I believe there is an exemption limit of Rs. 12000 on the amount of interest income per year per person. Can this interest income be treated under that interest bracket ?
5.If yes, I believe the remaining interest is taxable at normal rates after clubbing with their salary income. Otherwise if the interest income is entirely taxable, I'm thinking of alternatively suggesting their spouses or parents(who have no other income) to become the shareholders and lenders for my company - in that case will this interest income be treated under the normal income tax rules - and exemptions be allowed or will it have a yearly limit of 12000 or whatever amount the rules say.
6. If the interest cannot be treated as normal income then can I pay the interest as consulting charges(against an invoice) every month and make the loan agreement to be say 0%-3% interest - is that okay ?
Annually 63412.50 is the compounded interest for a loan of Rs. 500000 at 12%. Whenever there is an additional payment the principal will reduce for the next month.
7. I hope this payment of loan is entirely treated as business expense and offset against the income of the company - so I will not have any profit or tax liability for the company until the loan is paid in full to all the lenders.
8. In the loan agreement can there be a provision to say that no dividend can be declared or major expenses(say more than a lakh) be made without the approval of lenders ... ? Anyways I believe dividend cannot be declared from a loan unless there is profit(excess of the liability).
Thanks.
CAclubindia
