I am very curious as to why this income source was excluded Sponge. Could you tell us a little more as to the circumstances which have led to this, and whether this was upon the express advice of your own IP.
That's just where I have been driving this Michael your right divi's go up and down, be it in gas shares or in my case the bluebell railway! (which just for the record pays no divi's) As all profits are reinvested at the determination of the directors not the shareholder.
But it still does not answer my question as to why shares are not included in an IVA Michael? In the sense they have inherent value, which could be liquidated in some circumstances to pay creditors?
But it may answer the question as to why divi's are excluded from some proposals Melanie, it would be a nightmare to administor!
in other words
That's to say if you pay a min divi of £300 per month to the creditors made up from all incomes (the share divi at a given value at the time of inseption of the proposal)then goes up great news, but what if it goes down it would compromise the creditor min divi and the IVA could fail?
Dividends are rarely used for guaranteed income unless the client owns the company outright and it is the most tax efficient way of being paid. If you own shares that you do not need such as in British Gas then you are correct they should be sold for the benefit of creditors.
If the shareholding relates to a company that provides you with an income and you are the sole or main shareholder, then the shareholding should be excluded but the dividends would be dealt with at the annual review.
Thank you Michael interesting reading. And I guess it could be written in that way to support that outcome, but I never seen anyone mention it on this site.
So if the above is the case it would have to be a fair assumption that individual share holders to a company must be jointly liable to the same condition to a CVA's creditors and that their personal wealth must be taken into consideration to any creditor claim.
But the last paragraph is not true (?) and to my mind there’s a problem with that as both positions must be equal to hold water?
If you buy shares and their value goes down (as presumably it would if the company entered a CVA) then the shareholdrs have lost wealth and in that sense are personally liable for the company's financial health. But when you buy shares, you buy ownership; you don't lend the company money so wouldn't be treated as a creditor.
Broke of London I think you have slightly misread it. The creditors are the company suppliers who chase the directors for owed money. But as any creditor will tell you can't touch them for their personal wealth, hence my question to Michael about the balance of things
When you buy shares yes you get ownership, but really you are just lending money, believe me you are!
I wonder though If a company did go into a CVA their liabilities have just gone down substantially, therefore you may potentially see there share value go up, just depends on their ability to trade and your taste for risk!!!
Perhaps there is some confusion over here about shareholdings?
An owner of a limited company with a substantial shareholding, which provides that persons core income would not necessarily be included into the IVA - as to do so would effectively mean that the business wouid have to be sold leaving that person with no means of earning their living. In these circumstances, the shareholding would be disclosed but not included into the IVA necessarily - unless of course the value of the shareholding was substantial.
This is different from someone owning a few shares in a listed company and receiving the benefit of regular dividend cheques. In which case the shares are an asset which is not required for generating main income, and which should be offered for sale as part of the IVA.
Thanks to you all for taking the time to post on this thread. My final question to Michael and Melanie is how do you treat that unearned income in your proposals as a general rule today?
If someone owns shares in an unconnected business such as BT or utility companies we would normally want them sold or an equivalent amount introduced if they are to be excluded.
If someone has shares in a business which they control then the income is not necessarily unearned but a tax efficient way of releasing the profits. Unearned income would likely come under the windfall clause as I can see no reason to allow a client to retain something that was not allowed for in an income and expenditure account.
