Transfer of liability with asset to director

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

22 December 2016 A Company had paid 75% installment relating to a property but now want to transfer the pending liability to a director. The assets will be transferred in the name of director and he will make the balance payment .Whether its possible and how?

Pratik Shah

Pratik Shah (Expert)
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23 December 2016 What about the amount Company has already? Will Company get back it's money?

Querist : Anonymous

Querist : Anonymous (Querist)

23 December 2016 yup....it will be given back to the Company and the balance payment will be made by the director

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Got it! So the company has already paid 75% of the property cost, and now wants to transfer the property along with the pending liability to the director, who will pay the remaining 25%. The company will get refunded the 75% it already paid.

Here’s how this can be structured:

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### Steps & Considerations for Transfer of Asset with Liability to Director:

1. **Agreement for Transfer**:
Draft a formal **transfer agreement** or **sale deed** between the company and the director, specifying:

* Transfer of ownership of the property from company to director.
* Transfer of pending liability (outstanding payment) to the director.
* Terms of refund for the amount already paid by the company.

2. **Repayment to Company**:
Director pays the company the amount already paid (75%), effectively reimbursing the company.

* This could be done upfront or via an agreed payment schedule.

3. **Liability Transfer with Asset**:
The director takes over the remaining 25% payment liability directly with the vendor or financier.

* Notify the vendor/financier about the transfer and get consent if required.
* Update the purchase agreement or financing agreement to reflect the change in liability holder.

4. **Board Resolution & Approvals**:
Company’s Board of Directors should pass a resolution approving the transfer of asset and liability to the director.

* Ensure compliance with Companies Act provisions, especially regarding transactions with related parties (director).
* Get necessary approvals from shareholders if required.

5. **Accounting Treatment**:

* Company should record the refund from the director as recovery of asset cost.
* Derecognize the asset from company’s books after transfer.
* Director records asset acquisition and liability in his personal books.

6. **Tax & Legal Compliance**:

* Transfer of asset to director is a **sale/transfer**, so consider **capital gains tax** implications for the company on the difference between sale price and cost.
* Stamp duty and registration charges for transfer to director will apply.
* Check if any prior approvals from financial institutions or lenders are needed.

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### Summary Table

| Step | Action |
| ------------------------------ | ---------------------------------------------- |
| Draft Transfer Agreement | Asset + liability transfer + refund terms |
| Director pays company | Refund 75% paid amount |
| Transfer liability to director | Notify vendor/lender, update agreements |
| Board approval | Resolution for transaction |
| Accounting | Derecognize asset, record refund and liability |
| Legal compliance | Stamp duty, registration, tax implications |

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**Important:** This is a related party transaction (company to director), so **disclosures and approvals** under the Companies Act and applicable laws are critical.

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If you want, I can help you draft a template for the transfer agreement or guide you on the tax impact. Would you like that?

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