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VIC Purchase Land Using Shareholders?

Discussion in 'Property Law Forum' started by Beth44, 23 June 2015.

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  1. Beth44

    Beth44 Member

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    Could someone please tell me the legalities of property law about setting up a Company structure and using shareholders/investors to purchase shares in land. I also need to know if legally payments from shareholders can be given to the company director prior to settlement to ensure payment is made on settlement day? Thanks.
     
  2. Tracy B

    Tracy B Well-Known Member

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    Hi Beth44,

    individuals (shareholders) can purchase shares in the company (subscription fee). This usually acts as funding that is later used by the company to invest in the purchase and management of property (hopefully, for a profit!) This way, shareholders indirectly invest in the property and "own" the property, in that they own shares in a company and the company owns the property.

    Are you asking about a shareholder's loan? Yes, this is legal but the shareholder should have independent legal and financial advice and there should be full disclosure made to the shareholder about the pros and cons of entering into the loan. The board of directors (or shareholders through a general meeting, depending on the company constitution) must give its full consent to entering into the loan with the shareholder. This is because, the loan must be for the best interests of the company (i.e. shareholders as a whole), not just for the individual lending shareholder (presumably they will earn interest on the loan). There is an inherent conflict of interest if the lending shareholder is a director of the company. Therefore, it is best to have the informed consent of either all directors (board resolution) or all shareholders (general meeting resolution).
     

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