Active loan of a capital company

When it comes to loans from a corporation to its shareholders or partners, there are several important points to consider. This post highlights the essential aspects that must be considered when taking out a loan from a corporation.

Active Loans: Understanding and Challenges

Active loans can take various forms for a corporation and appear on the asset side of the balance sheet. However, these credits of the company to its shareholders or partners can be tricky. In particular, boards of directors need to be informed about potential risks, as they are responsible for granting the loans. Especially in SMEs, where the loan recipient is often also a shareholder and a board member, this can lead to conflicts of interest. Furthermore, minority shareholders must be protected to prevent disadvantage by majority shareholders.

Risks of Active Loans

Active loans can be commercially and fiscally delicate. Commercially, there can be a violation of the prohibition on the return of contributions, which means that the company's share capital must not be returned directly or indirectly to shareholders. This can lead to significant legal consequences. Tax-wise, active loans can be regarded as non-genuine loans, meaning that tax authorities may not recognize them as legitimate loans and treat them as concealed profit distributions, which can lead to high tax burdens.

Optimal Design of Loan Agreements

To minimize potential risks, it is crucial to carefully craft loan agreements. Clear repayment terms, the definition of collaterals, and transparent contractual terms are essential. It is strongly recommended to consult an experienced legal and tax adviser to ensure that the loan agreements comply with legal requirements and consider the interests of all parties.