23 January 2024
my private limited company have 9L paid up capital and 15L as authorized capital can i borrow loan from my father 50L after passing resolution because i read on company act it say only 60% of paid capital only can borrow as loan, is there any way to infuse 50L loan from my father to my company
06 July 2024
In accordance with the provisions of the Companies Act, 2013, private limited companies are indeed restricted in borrowing limits. Here’s how it typically works:
1. **Borrowing Limit**: As per Section 180(1)(c) of the Companies Act, 2013, a private company cannot borrow money in excess of its paid-up capital and free reserves, unless authorized by a special resolution passed at a general meeting.
2. **Specific Provisions**: The Act generally limits the borrowing capacity of a private company to 2 times its paid-up capital and free reserves, or ₹50 lakhs, whichever is higher. This is unless a special resolution is passed allowing for a higher borrowing limit.
3. **Authorized Capital**: The authorized capital of ₹15 lakhs does not directly impact the borrowing limit; it primarily defines the maximum limit up to which the company can issue shares.
4. **Practical Solution**: To infuse ₹50 lakhs from your father into the company as a loan, you have a few options: - **Issue of Debentures**: If permitted under your company's Articles of Association and approved by shareholders via a special resolution, you may issue debentures to your father. Debentures are treated as a form of loan and can be issued up to the borrowing limits set by law. - **Special Resolution**: Hold a general meeting and pass a special resolution to increase the borrowing limits beyond the prescribed limits (i.e., beyond 2 times of paid-up capital and free reserves or ₹50 lakhs, whichever is higher). This would require compliance with procedural requirements under the Companies Act. - **Convertible Loan**: Structure the loan as convertible debt, which could be converted into equity shares in the future, subject to compliance with applicable laws.
5. **Legal and Financial Advice**: It's crucial to seek advice from a company secretary or legal advisor who can guide you through the process of passing resolutions, ensuring compliance with the Companies Act, and structuring the loan in a legally sound manner.
By following these steps and ensuring compliance with the provisions of the Companies Act, you can legally infuse ₹50 lakhs from your father into your private limited company.
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