maximum allowable interest rate on loan from share holders

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viral (Querist)
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11 February 2011 what is the maximum allowable interest rate on loan from share holders of pvt. ltd. company?

Sunil Kr. Sanganeria

Sunil Kr. Sanganeria (Expert)
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11 February 2011 In my opinion, there is no such provision in companies act or other Act.

Any reasonable rate can be paid on loan taken from shareholderd.

The reasonable rate will be determined by considering several factors such as:

1.rate of interest paid by company on loan taken from a person other than shareholders

2. If company has taken loan from bank, interest charged by bank

3. rate of interest charged by other company on fixed deposit etc.