Question

Discuss how the creation of a company may impact the ability of 4 individuals to borrow money to fund their operations

Answer 1

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Creation of a company may impact several stakeholders in their ablility to borrow funds from various sources to fund their operations.normally banks and lendors may give loans to the companies .

companies get loans easier than it will be to the individuals. company while applying for loan may also produce Mou and affidavit as well as a signed charge form by both lender and the company and also mortage a collateral corresponding to the borrowed funds.the company should have open a bank account and through which the money were deposited and repaid.the comany while borrowing money, needs the approval of the shareholder by special majority and approval of the board also required. an approved copy of resolution and the signed board minutes has also to be presented to the lender while borrowing money.4 individuals creating a company and borrowing money from various sources to fund their operation have different perspective.

company is a separate legal entity which have right to sue and right to being sued and also have the perpectual succession which means company is run in an assumption that they never ends based on the going concern principle. the 4 person who create the company becomes the shareholders also. so they will be comes under the definition of a related party and the transaction should be material in nature and should be disclosed in notes to accounts which will give a relevant and faithful information to the users of the financial statements.if they borrow money then the money should be shown as a long term borrowings under the liabilities section of the financial statments.if the company is unable to repay the money back to the lender then the legal case will be made against the company as they are the separate legal entity . the directors and shareholders will be responsible for all actions done in the period on which they are under this responsibility as director and as an owner.

the intrst on which borrowed funds were taken were recognised as a financial income which should be recognised in statement of profit and loss under continuing operation.

the 4 individual either as a shareholder or as a subscriber to the memorandum will be individually and collectively responsible. these are the impact which will be reflected.