Loan from outsider
This query is : Resolved
07 June 2019
Plz tell me whether a Private Limited Co./Public limited company can take Loan from an outsider ?
08 June 2019
Yes, but to comply section 73 and The Companies (Acceptance of Deposits) Rules, 2014.
10 June 2019
But section 73 provides that no company shall invite, accept or renew deposits under this Act from the public except in a manner provided under this Chapter
The chapter provides deposit from members by the private and public under section 73 and from public by eligible public company under section 76.
Then how can private company/ineligible public company accept deposit from public ?
The chapter provides deposit from members by the private and public under section 73 and from public by eligible public company under section 76.
Then how can private company/ineligible public company accept deposit from public ?
03 August 2024
In India, the ability of a private or public company to take loans or deposits is regulated under the Companies Act, 2013. Here’s a detailed explanation addressing your queries:
### **Loan from Outsiders**
**1. Private Limited Company:**
- **Borrowing from Outsiders:** A private limited company can take loans from outsiders, including individuals and financial institutions. The Companies Act, 2013 does not restrict a private company from borrowing funds from external sources. Such loans need to be properly documented and comply with the terms specified in the loan agreement.
**2. Public Limited Company:**
- **Borrowing from Outsiders:** Public companies also have the freedom to borrow from external sources, including banks, financial institutions, and individuals. Public companies often engage in borrowing through debt instruments like debentures or bonds.
### **Acceptance of Deposits:**
**1. **Deposits from Members:**
- **Private Limited Company:** As per Section 73 of the Companies Act, 2013, a private company can accept deposits from its members, subject to the conditions specified in the Act and rules made thereunder.
- **Public Limited Company (Ineligible):** For public companies that are not eligible (i.e., those that do not meet the criteria for eligible public companies), the ability to accept deposits from the public is restricted. They cannot invite or accept deposits from the public, except in accordance with Chapter V of the Companies Act, 2013.
**2. **Deposits from the Public:**
- **Eligible Public Company:** Only eligible public companies can accept deposits from the public. The conditions for such acceptance are outlined in Section 76 of the Companies Act, 2013. These companies need to comply with various regulatory requirements and obtain approval from the Reserve Bank of India (RBI) if required.
### **Regulatory Framework:**
**1. **Section 73 - Acceptance of Deposits from Members:**
- Private companies can accept deposits from their members (shareholders) without adhering to the strict conditions imposed on public deposits.
- Deposits from members must be made in accordance with the rules specified under the Companies (Acceptance of Deposits) Rules, 2014.
**2. **Section 76 - Acceptance of Deposits from Public:**
- Public companies can accept deposits from the public if they meet the eligibility criteria specified in the Act.
- Such companies must comply with additional requirements like filing a circular with the Registrar, maintaining deposit repayment reserve, and adhering to the provisions relating to the creation of a deposit repayment reserve.
**3. **Deposits and Loans Distinction:**
- **Loans:** Can be taken from outsiders and do not require adherence to the provisions applicable to public deposits.
- **Deposits:** Refers specifically to money accepted from the public or members, and is subject to stricter regulatory controls.
### **Summary:**
- **Private Limited Companies** can borrow from outsiders without restrictions, but can only accept deposits from their members.
- **Public Limited Companies** (that are not eligible) cannot accept deposits from the public but can borrow from outsiders.
- **Eligible Public Companies** can accept deposits from the public under specific conditions outlined in Section 76 of the Companies Act, 2013.
By understanding these provisions, companies can ensure compliance with regulatory requirements while managing their borrowing and deposit-taking activities effectively.
### **Loan from Outsiders**
**1. Private Limited Company:**
- **Borrowing from Outsiders:** A private limited company can take loans from outsiders, including individuals and financial institutions. The Companies Act, 2013 does not restrict a private company from borrowing funds from external sources. Such loans need to be properly documented and comply with the terms specified in the loan agreement.
**2. Public Limited Company:**
- **Borrowing from Outsiders:** Public companies also have the freedom to borrow from external sources, including banks, financial institutions, and individuals. Public companies often engage in borrowing through debt instruments like debentures or bonds.
### **Acceptance of Deposits:**
**1. **Deposits from Members:**
- **Private Limited Company:** As per Section 73 of the Companies Act, 2013, a private company can accept deposits from its members, subject to the conditions specified in the Act and rules made thereunder.
- **Public Limited Company (Ineligible):** For public companies that are not eligible (i.e., those that do not meet the criteria for eligible public companies), the ability to accept deposits from the public is restricted. They cannot invite or accept deposits from the public, except in accordance with Chapter V of the Companies Act, 2013.
**2. **Deposits from the Public:**
- **Eligible Public Company:** Only eligible public companies can accept deposits from the public. The conditions for such acceptance are outlined in Section 76 of the Companies Act, 2013. These companies need to comply with various regulatory requirements and obtain approval from the Reserve Bank of India (RBI) if required.
### **Regulatory Framework:**
**1. **Section 73 - Acceptance of Deposits from Members:**
- Private companies can accept deposits from their members (shareholders) without adhering to the strict conditions imposed on public deposits.
- Deposits from members must be made in accordance with the rules specified under the Companies (Acceptance of Deposits) Rules, 2014.
**2. **Section 76 - Acceptance of Deposits from Public:**
- Public companies can accept deposits from the public if they meet the eligibility criteria specified in the Act.
- Such companies must comply with additional requirements like filing a circular with the Registrar, maintaining deposit repayment reserve, and adhering to the provisions relating to the creation of a deposit repayment reserve.
**3. **Deposits and Loans Distinction:**
- **Loans:** Can be taken from outsiders and do not require adherence to the provisions applicable to public deposits.
- **Deposits:** Refers specifically to money accepted from the public or members, and is subject to stricter regulatory controls.
### **Summary:**
- **Private Limited Companies** can borrow from outsiders without restrictions, but can only accept deposits from their members.
- **Public Limited Companies** (that are not eligible) cannot accept deposits from the public but can borrow from outsiders.
- **Eligible Public Companies** can accept deposits from the public under specific conditions outlined in Section 76 of the Companies Act, 2013.
By understanding these provisions, companies can ensure compliance with regulatory requirements while managing their borrowing and deposit-taking activities effectively.
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