Head of real estate and commercial law practice
Specialist in the field of commercial law and process. Real estate, construction support; land law and protection of property ownership.
Reimbursement from the founder
Repayable financial assistance is one of the forms of support for domestic businesses, which is needed in particular for the rapid replenishment of working capital. It is provided by the founder (participant) under an agreement for use for certain operational purposes. Such financial assistance is of great importance for the enterprise, since, firstly, it can cover urgent needs, and secondly, it reduces the tax burden on the business (it is considered a liability, not profit, and therefore is not taxed by law). To learn more, please read the article below.
What is repayable financial assistance?
Repayable financial assistance is funds that one party (founder) provides for the use of another party (enterprise) for a certain period of time. According to 14.1.257 of the Tax Code of Ukraine, it:
- comes into use under the contract;
- does not provide for the accrual of interest or compensation for use;
- is necessarily returned to the founder.
What types of repayable financial assistance can there be?
Repayable financial assistance is classified by subject composition. In particular, it can be:
- from founders (participants or shareholders);
- from related legal entities or individuals (for example, related enterprises, managers);
- from other persons (loan from a counterparty).
What should be provided for in an agreement on the provision of repayable financial assistance?
In an agreement on the provision of repayable financial assistance, which is essentially an interest-free loan agreement (Article 1046 of the Civil Code of Ukraine), a number of conditions must be clearly prescribed:
- first, the subject and form of conclusion. In accordance with current national legislation, such an agreement must be concluded in writing, and its subject will be an amount that exceeds ten times the amount of the non-taxable minimum (1,700 hryvnias or more);
- second, the amount and procedure for its transfer. It is necessary to clearly define the lump sum (if necessary, divided into separate payments) and indicate whether it will be provided in cash or by bank transfer. In the first case, a cash order must be kept;
- thirdly, the terms of returning financial assistance to the founder. It is worth emphasizing that if the agreement does not indicate that interest is not accrued on the amount of funds upon return, then by its nature it will no longer be considered a contract of repayable financial assistance. Therefore, in the terms of return, in addition to the date, method and conditions of early return, this point must also be regulated;
- fourthly, additional conditions. The parties are also free to establish sanctions for failure to fulfill its terms in the content of the agreement, the procedure for considering possible disputes between them, the intended use of funds that is allowed, as well as a list of force majeure circumstances that will exclude any liability for improper fulfillment of the terms of the agreement.
How will a business lawyer help in the case of providing repayable financial assistance from the founder?
Consulting support
The lawyer-entrepreneur of the company “Prikhodko & Partners” provides various services for businesses in order to ensure its legal activity and protection. The very first stage in cooperation with him will be an introductory consultation, during which the specialist:
- will explain the procedure for processing a returnable financial assistance from the founder;
- will advise on the specifics of the content of the agreement on its provision;
- will provide recommendations on the correct documentation of the transfer of funds, etc.
Development and conclusion of contracts
The quality of the contract directly affects its legality. As part of the service for developing a draft agreement on the provision of returnable financial assistance, the lawyer of the company “Prikhodko & Partners” will:
- will draw up the text of a legally correct loan agreement;
- will take into account its specifics depending on the client’s request (regarding the amount, date, terms of return, etc.);
- will assist with the preparation of primary documents to confirm the transfer of cash (if necessary);
- if necessary, will draw up the text of an additional agreement to the contract (for example, on extending its term).
Representation in court
Finally, a business lawyer will become your reliable representative in court when a dispute arises with the founder. It will be especially relevant to settle the return of financial assistance in the event that the founding composition of the enterprise changes or the liquidation procedure is initiated. A lawyer in this area will be able to:
- prepare a claim and other procedural documents for the court;
- represent the client directly at court hearings (including in the court of appeal or cassation);
- provide support for the forced execution of a court decision (through the bailiff service).
Thus, repayable financial assistance is provided under a loan agreement for a certain period, without interest, and with mandatory return upon the expiration of the agreed time. To ensure legal correctness and avoid possible risks, the enterprise should order legal support from an experienced specialist, in particular a lawyer for economic issues. A specialist from our company will be useful to you, primarily with his consulting support, assistance in developing draft contracts and additional agreements, and defense in court.
To receive comprehensive legal advice and find out the price of a lawyer’s services for processing the provision of repayable financial assistance to the enterprise from the founder, fill out the form below.
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Is a subscriber form of service possible to quickly resolve issues as they arise?
Yes, of course, we take companies for permanent support.
The subscription form of service allows you to receive a full range of legal services on an ongoing basis for a fixed monthly fee.
Our lawyers will accompany all economic legal relations of your company: from drawing up contracts and solving corporate issues to representing interests during inspections by regulatory bodies and in court disputes.
We have very flexible pricing, so contact us and we will discuss your specific case.
Do you work only in Kyiv?
Fortunately, modern technologies allow us to effectively solve almost any legal issue online regardless of your location. In cases where personal presence is necessary, our lawyers are ready to travel to any point in Ukraine. Moreover, thanks to our network of reliable partners abroad, we can provide legal support even in international cases. Our goal is to provide you with quality legal assistance wherever you are.
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