Loan from the relative of shareholder of a private company

This query is : Resolved

Guest

Guest (Querist)

08 January 2011 Dear Friends / Experts,

Please see the following and advise :

A, a shareholder in a ABC private company.
B, a relative of A.

Query

Can B (relative of shareholder) directly give loan to ABC private company ?

Ans : ...............

I shall wait for your views.

Thanks.
DK.

CA Shailesh Kumar Bhagat

CA Shailesh Kumar Bhagat (Expert)
Follow

08 January 2011 Yes, B can directly give the laon.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
Follow

09 January 2011 No. It is a violation of section 3(1)(iii) (d) of The companies Act,1956.

Reason is deposit includes loan as per rule 2 of Companies (Acceptance of Deposits) Rules,1975 and loan from share holder's relative is not an exempted deposit as per the said rules meaning thereby if accepted it will violate the provisions of 58A of the said act.

Upgrade to CAclubindia Pro. Subscribe Now!

Jayashree S Iyer

Jayashree S Iyer (Expert)
Follow

10 January 2011 Agree with Warrier Sir. Taking loan from director or his relative or shareholder is excluded from the term "deposit". Taking loan from shareholder's relative will be considered a "deposit" and would attract the provisions of Section 58A.

Message likes : 1 times