Borrowings from director, who is a shareholder

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2017 While Auditing a private limited company, it was found that the company has been accepting monthly borrowing: from one of its directors, who is holding 50% of paid up share capital.
My question is whether provisions of section 73(2) of Companies Act 2013 applicable in this case or ?
Or, these deposit comes under the purview of Section 76 of the Act?
Thanks in advance!

Pratik Shah

Pratik Shah (Expert)
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19 January 2017 Receiving Loan from Directors does not fall under the purview of Definition. It is not a contravention.

Querist : Anonymous

Querist : Anonymous (Querist)

19 January 2017 Thanx for your reply Pratik.
Can't we consider the loan advanced by director holding shares in the said company as deposit from shareholder?

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Pratik Shah

Pratik Shah (Expert)
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19 January 2017 No..it can't be considered as such. By virtue of his directorship, he gets benefit of Rule 2(3)(viii) of Deposit Rules irrespective of whether he is shareholder or not.

Querist : Anonymous

Querist : Anonymous (Querist)

19 January 2017 So, as per the definition given to deposits under Companies Act 2013, read with exclusions given in Companies (Acceptance of Deposit) Rules 2014 to the term deposits, amounts received from a person who is a director at the time of such payment shall be outside the scope of sections 73-76 of Companies Act 2013.
Now it is clear!
Thanks Pratik Shah!

Pratik Shah

Pratik Shah (Expert)
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20 January 2017 Yes, that is correct.