Replies to Queries - 2

Widget Systems Limited was incorporated two years ago to develop and market an energy-saving device. In that time the company has lost £100 000 and this has been financed by the sole director.

The losses are due to poor sales and too many employees. Recently it has reduced the staff to three including the director and I have been approached by the other two employees to restructure the business.

Basically the three of them wish to form a new company called Widget Systems (Sales) Limited and the two employees will also become directors of this new company. All sales will be generated by the new company and this will purchase the product from the old company which will add a mark-up of 15 per cent in order that the director's loan will ultimately be repaid. This could also be considered to be...