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Unsecured Loan From Directors and Shareholders

renu dutt (c a) (231 Points)

05 June 2010

DEAR EXPERTS,

CAN A PVT. LTD. CO. TAKE UNSECURED LOANS FROM ITS SHAREHOLDER, DIRECTORS AND FROM THE RELATIVES OF THE DIRECTORS AND SHAREHOLDERS AND UPTO WHAT LIMIT.DOES SECTON 58A , COMES IN WAY.

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35 Replies

CA Shree Jain (Chartered Accountant) (1572 Points)
Replied 05 June 2010

Please note that private limited company can take unsecured loan from its shareholders, directors and their relatives and the same would not be covered under section 58A and other deposit provisions as such transaction is exempt by deposit rules 1975.

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Shashikala Shah (Practising C S ) (43 Points)
Replied 05 June 2010

Dear Renu,

In case of pvt ltd cos. , there is no limit on the amount of loan taken from members, directors & their relatives.

Shashikala Shah

PCS

Aneesh (Pursuing CA) (101 Points)
Replied 07 June 2010

Agree with Ms Shashikala...there is no limit on Loans taken from directors or shareholders in the case of a private limited company

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 07 June 2010

Hi,

INTER CORPORATE LOANS

Kindly appreciate, A public and private limited company can take loan from other company and body corporate and the same would be covered under section 372A as an inter corporate loan. The above is exempt from the deposit rules, 1975.

A public and private company can also take loan from Banks/PFIs under the same section 372A as an inter corporate loan.

But if such company take loan from an individual (Not from director or member) the same would be considered as public deposit under section 58A read with Companies (Acceptance of Public Deposit) Rules, 1975.

As per the definition of deposit given in Rule 2 of the said rules “deposit means any deposit of money with and include any amount borrowed by, a Company but does not include certain amounts.

There are certain amounts which are not considered as deposit as per the rules above and such amount includes inter corporate transaction hence amount taken by company/bank and PFI from other corporate are not considered as deposit.

On the other hand amount taken by public company from individual is not covered in the exemption given by the said rule, hence amount taken by public company from individual is considered as deposit under section 58A read with Companies (Acceptance of Public Deposit) Rules, 1975.

LOAN FROM INDIVIDUALS/OUTSIDERS

Kindly appreciate, A private limited company can take unsecured loan from its shareholders, directors and their relatives and the same would not be covered under section 58A and other deposit provisions as such transaction is exempt by deposit rules 1975.

But if a private company take unsecured loans from persons other than its shareholders, directors and their relatives the same would be considered as a violation of section 3(1)(iii) of the Companies Act, 1956.

Revert if there is any doubt.

Regards

5 Like

renu dutt (c a) (231 Points)
Replied 07 June 2010

Thanx to you all.

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girija.parcha (Parctice) (35 Points)
Replied 16 June 2010

sir,

if a director has taken a loan from a bank,and he transfer the funds to comapny, comapny directly repaying the loan to bank on behalf of director,

then can it be treat as a loan taken from bank by the comapny or it should be treat as a unsecured loan from director?

can a private limited company take interest free loan from director?

poonam verma (Company Secretary) (191 Points)
Replied 03 July 2010

Hi frends,

Pls clarify some points on unsecured loan from Director in a Public Co.

1.Whether the unsecured loan taken by public co. is exempetd u/s 58A.

2. As per deposit rule 2(b)(Xi) unsecured loan taken from Directors in pursuance of stipulation of financial institution is exempted deposit.

whether it is necessary that the FI should incorporate in its sanction letter that promoters are required to contribute to the funds of the Company.

3. whether unsecured loan, if public ltd. Co. can take, should by interest free.

regards,

POonam

Abhijit Dey (ACCOUNTANT) (21 Points)
Replied 13 July 2010

Dear Ankurji ,

If any company taken any unsecured loan from outsider apart from director & shareholder, what will be the violation of Comapnies act 1956 , setion 3(1)

Please clarify

Thanks

Abhijit

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 13 July 2010

Originally posted by : Abhijit Dey
	Dear Ankurji , If any company taken any unsecured loan from outsider apart from director & shareholder, what will be the violation of Comapnies act 1956 , setion 3(1) Please clarify Thanks Abhijit

If the company in question is a private company then such acceptance form outsider would be considered as violation of section 3(1)(iii)(d).

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 14 July 2010

Dear All,

First of all A Private Company can only take deposits from its Directors, Shareholders and their relatives as per sectin 3(1)(iii)

Therefore, a private company can not take any deposti from any other person.

However, as per Rule, 2(b)(ix) any amount received from a person who at the time of receipt of the amount was a director of a COMPANY or any amount received from a relative of a diretor or its member by a PRIVATE COMPANY.

Company means Private as well as Public Company.

Therefore, any amount received by a Director of Public Company is not considered as deposit and deposit rules does not apply on it.

Further any amount received by Director, their relative or shareholder by a Private Company is not considered as deposit and deposti rules does not apply on it.

"Thus, as per section 3(1)(iii) read with Rule 2 of Acceptance of Deposit Rules, 1975 any amount received by a Private Company can not considered as deposit, it would alwas considered as Unsecured Loan."

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Vasant Patel (Proprietor) (47 Points)
Replied 25 August 2010

Dear Sir

Can you advice me for the following ?

If closlely hedl Company accepted unsecure Loan from Share Holders and others and at the end of financial year Interest there on accrued but not paid ? then will Interest amount can be considered as Unsecured Loans U/s. 58A or not ? B/c asically interest accrued but not paid is current liabilities items ?

Regards

Priyanka (CS) (141 Points)
Replied 04 September 2010

Can a Listed company accept unsecured Interest free deposits from the promoters' relatives?

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 04 September 2010

Dear Vasant,

Yes, the amount of interest due but not pad is added in the Unsecured loan in the balance sheet.

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 04 September 2010

Dear Priyanka,

As per rule 3(c) no company shall accept or renew any deposits in any form, on a rate of interest exceeding[the maximum rate of interest prescribed by the RBI that the NBFC can pay on their ublic deposits] per annum at rests which shall not be shorter than monthly rests.

It means only maximum rate of interest is prescribed but not minimum, therefore, depends upon the Company.

It may take deposit at any rate below that maximum rate.