When selling a company, many business owners focus primarily on the sale price of the shares or equity interests. However, another key element may come into play: the shareholder loan account. So, can it be transferred? And more importantly, what are the legal, financial, and tax implications? Let’s break it down.
What Is a Shareholder Loan Account?
A shareholder loan account represents a receivable or payable between a company and its shareholder. It may result from loans granted by the shareholder, or simply from amounts that have built up over time through financial flows between the shareholder and the company.
Depending on the situation, the account may show either a debit or a credit balance, which can have a direct impact when the business is sold.
A Debit Shareholder Loan Account: A Sensitive Issue to Anticipate
When the shareholder loan account is in debit, it means the shareholder owes money to the company. This situation requires special attention during the sale process.
In practice, the treatment of this account must be negotiated with the buyer. However, such negotiations can lead to significant tax consequences depending on the terms agreed.
In most cases, the seller chooses to repay the debit balance shortly after receiving the sale proceeds. In fact, it is often recommended to repay it even before putting the company up for sale. This helps avoid a sensitive topic with potential buyers and makes negotiations much smoother.
A Credit Shareholder Loan Account: A Strategic Opportunity
A credit shareholder loan account reflects funds advanced by a shareholder to the company. In other words, it is a loan granted by the shareholder, separate from their equity contribution.
When the account is in credit, the company owes money to the shareholder. In that case, it is entirely possible to transfer this receivable at the same time as the shares or equity interests.
This option can be particularly relevant in certain specific situations. For example, when the buyer hopes to retain tax losses carried forward within the acquired company. While this scenario is relatively rare, it can be a useful lever when Structuring the transaction.
Indeed, a credit shareholder loan account makes it possible to extract cash from the company through loan repayments, without the tax friction typically associated with dividends. However, this strategy requires careful consideration.
Watch Out for Financial and Tax Balance
Even though transferring a credit shareholder loan account can offer advantages, several factors must be assessed thoroughly. In particular, it is important to ensure a healthy balance sheet structure between shareholder debt and equity contributions. In addition, the tax treatment of interest paid on the shareholder loan account must be anticipated properly to avoid unpleasant surprises.
In other words, each decision should be part of an overall transaction strategy and never handled in isolation.
How Does the Transfer of a Shareholder Loan Account Work?
From a legal perspective, transferring a receivable is relatively straightforward. No heavy formalities are required: a simple assignment agreement is sufficient.
However, one important legal requirement applies: the target company must be informed of the transfer. It is also essential to note that under Belgian law, the company cannot legally oppose it. This notification ensures that future repayments are properly made to the new creditor.
The Sale Price: No Double Payment
One key point must be clearly understood: the buyer will not pay twice. In practice, the overall purchase price will be allocated between:
- one portion corresponding to the purchase of the shareholder loan account, and
- the remaining portion corresponding to the purchase of the shares or equity interests.
This is perfectly logical. The shareholder loan account is a financial liability, just like a bank loan. It therefore reduces the value of the shares when the company is being valued.
Structuring: A Key Step in the Transaction
All of these considerations are part of what is known as transaction Structuring. Each situation is unique and must be analysed based on the seller’s objectives, the buyer’s expectations, and the applicable tax environment.
That is why specialist support is essential. At B2 Transmission, we review each case with the utmost care in order to optimise the sale, secure tax considerations, and maximise the overall value of the transaction.
Conclusion
Yes, a shareholder loan account can be transferred, but this decision should never be taken lightly. Whether the account is in debit or credit, each situation involves specific consequences. A thorough analysis and an appropriate structure are the keys to a successful business sale.