There is no such thing as a shareholder's current account than in companies. In the case of sole proprietorships, this will be referred to as an operator's account and will operate differently.
What is the purpose of a shareholder's current?
Expenses on behalf of the company
You are a partner in a company. You sometimes pay expenses on behalf of your company.
For example, you invite a customer to a restaurant. You do not have a bank card in the company's name. You pay with your personal bank card. The expense is not lost. You keep the invoice. You write on the invoice the name of the person invited, the purpose of the appointment and that it is a payment by current account. Then send it to the person in charge of the accounts.
An account is opened in your name in accounting of your company. The accountant will take into account the expense you have incurred. The expense will be load and a debt will be found against you. This will take into account the fact that the company must reimburse you for this expense.
Cash advance
The company may have a temporary cash requirements.
For example, when the company is set up. As long as the business has not yet started up, expenses will have to be incurred, even though no revenue has yet been received. You may decide to make a cash advance to the company. This sum will be charged to your shareholder current account. A debt of the company towards you is then registered. The company will repay you when it has the cash to do so.
Difference between share capital and cash advances
You must not not to confuse share capital with a cash advance. Share capital is the consideration for shares that you hold in the company. The company has given you equity interests in exchange for the capital you have paid in. It is therefore not indebted to you. The capital belongs to the company. You cannot obtain repayment of the share capital. You will recover your initial investment, or not, when you sell your shares or liquidate the company.
Abuse of corporate assets
Please note! You can lend money to the company, but the opposite is not allowed. prohibited. The company cannot lend you money. This practice is an abuse of corporate assets. This is known as’ABS. It is a criminal offence.
In this situation, you have used a company asset, in this case the treasury. It is important to understand that a company is a a legal entity distinct from the individual partner. The company has no interest to lend money to a partner.
In accounting terms, we talk about current account in debit. The company has a claim against its partner.
Consequences of a current account in debit
This position is prohibited. However, if it exists, not only does the partner take a criminal risk but the sums wrongly deducted constitute a remuneration subject to tax and social security contributions.
Misuse of corporate assets is punishable under criminal law by 5 years' imprisonment and 375,000 in fines. Civil penalties are incurred in the form of damages for compensation for the loss suffered by the company.
