Evidence of money already invested not accepted

[Irfanmz]

hello Tanvir, its me again with anther question and would like your advice again as i was considering your advice of director loan but come accross below requirement from HO guidance,

The amount of money invested should not:
• include the value of any residential accommodation or property development, or
property management; or
****• be in the form of a director’s loan, unless it is unsecured and is subordinated in favour
of the third-party creditors.


could i please ask if you can help me with second option that loan has to be unsecured and is subordinated in favour
of the third-party creditors.

again thanks for all your great advice!

[tanvir1985th]

Expecting that u r not taking money from 3rd party, 3rd party matter is ignored. Unsecured means company hasn't given any security(ie assets) against the loan which should not be the case in yr case anyway. So u do not fall under those terms

[Irfanmz]

Thanks again Tanvir,
Yes I did not take money from any 3rd party but below para from HO again confuses me or may be I am playing dumb here I am sorry if I am misunderstanding.
Please read below
“If you have made the investment in the form of a director’s loan, it must be shown in the relevant set of accounts provided, and you must also provide a legal agreement, between you (in the name that appears on the application) and the company.

This agreement should show:
• the terms of the loan;
• any interest that is payable;
• the period of the loan; and
• that the loan is unsecured and subordinated in favour of third-party creditors.

If it is not clear from the information provided that the loan is unsecured and subordinated in favour of third-party creditors, we will not accept the loan for the award of points.”

As I do not fall under these terms but HO states that “If it is not clear from the information provided that the loan is unsecured and subordinated in favour of third-party creditors, we will not accept the loan for the award of points.”

So if I submit Director Loan agreement without all these terms with just mentioning amount of money I am lending to my business for specific time with zero interest and get it signed from solicitor would this fulfil requirements?

Thanks for your time and help!

[tanvir1985th]

whether loan is unsecured or not will be determined by the transfer from yr own acc. u should make a loan agreement for a long period like 5 years mentioning its unsecured and for the purpose of investment. relevant set of accounts would be balance sheet where it will show director's loan account with yr name. plus acquire a certificate as well from chartered accountant saying u have invested that money. that should be it. but remember nobody has gone up to renewal yet. so u can never be sure what UKBA want as the dumb case workers have got very limited knowledge about accountancy. hope that helps

[ecaLegal]

Hello Irfanmz

It sounds like you have done everything correctly, although I would have to see your accounts and bank statements to be sure.
To clarify:
You paid the 50K from your own personal account into the business account.
Expenditure is paid from your business account, and supported by invoices.

In this case, it is all counted as investment. Of course, any salary or dividend which the company paid to you as director IS NOT counted as investment, but payment to other employees is fine.

You will need to make sure you collect all the supporting documents, be careful that they are correct and don't contradict each other in any way, and make sure that the accounts and other documents are prepared and presented in the right way to meet the immigration rules.

You are going in the right direction, but choose a good chartered accountant and ask them to co-operate with the immigration adviser who is preparing your application.

Good luck!

Ben Elton, eca Legal

[ecaLegal]

If the investment is not as share capital, then it has to be a director's loan. The loan agreement absolutely must, clearly, state all the terms demanded by the Home Office. This is easy though, as you are preparing the agreement yourself (or instructing a lawyer to prepare it for you)

[Irfanmz]

Dear Ben and Tanvir Thanks you so much you guys are very Kind and I am sure a lot of people will benefit from your valuable information.
@Ben just to make everything crystal clear in your post you mentioned “Payment to other employees” (Wages) is counted as an investment? And finally as you mentioned that “The loan agreement absolutely must, clearly, state all the terms demanded by the Home Office” HO terms are loan agreement has to be unsecured and subordinated in favour of third-party creditors. So if I do not meet these term would my loan agreement without these terms will still be valid?
Thanks again for your help.

Irfanmz

[ecaLegal]

Sorry for the late reply - I couldn't log in for a while.
If your loan agreement does not contain clear clauses that the loan is unsecured and subordinated in favour of third party cerditors, the investment does not count, and your visa will be refused.
To keep it simple, add very simple, separate clauses to the loan agreement:
"The funds loaned under this agreement are unsecured" for example.

[whiteroses]

But the guidance says you can show direct cash investment on page 40...

[whiteroses]

i would suggest make the invoices in the name of business showing u as director on the invoice. make a director's loan agreement for 50K transfer. wages is not investment, its expense.thx

If a person injects funds as share capital, loan, etc and uses those funds to pay his employees, I think that does count as the requirement stated in the guidance is that money invested as share capital/loan/cash investment should be used up by the business rather than just stay in the account. It doesn't say that anything other than property management is not included.

[calfungiation]

Wow, thank you very much for your reply. I'm planning for the Tier 1 and still puzzled about the 200K proof of investment part when I apply for extension.

Do I have to PROOF that the business have SPENT the 200K? Or just a proof of investment by director's loan is sufficient?

Thanks!