Accepetence of loans from relatives of directors

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sandeep reddy (Querist)
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20 February 2014 can a public limited company accept loans from relatives of directors. if yes then what is the procedure and sections regarding this.

SHAKTI JINDAL

SHAKTI JINDAL (Expert)
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21 February 2014 As per Rule 2(b)(ix) of the Companies (Acceptance of Deposits) Rules, 1975, “deposit” means any deposit of money with, and includes any amount borrowed by, a company, but does not include-

(ix) any amount received from a person who, at the time of receipt of the amount, was a director of the company or any amount received from a relative of a director or its member by a private company;
Provided that the director, relative of a director or member, as the case may be, from whom the money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting from others.

Since loans from a relative of director is not included in ‘public deposits’, a public limited company may avail the same, subject to the furnishing of requisite declaration in accordance with the above proviso.