Loan from shareholders and its treatment in DPT-3

SHORT SUMMARY

In this editorial, the author discusses about the Provisions of loan from shareholders by Private Limited Company, Process of acceptance of loan from shareholder, Treatment of such loan in DPT-3, Balance Sheet etc. There are many ambiguities in the minds of corporates and professionals about the treatment of Loan from Shareholders, as to whether the same is considered as a deposit or not?

Section/ Rules Involved

Important - Circular/ Notification Involved

Forms Involved

Extract of section/ Rules/ Circular shall be mentioned at the end of the article link shall be provided for the same.

A. PROVISIONS - LOAN FROM SHAREHOLDER

PRIVATE LIMITED COMPANIES

• Under Companies Act, 1956 it was allowed to accept loan from the Shareholders and such loan considered as non-deposit.
• Under Companies Act, 2013 since 01st April, 2014 it was not allowed to accept deposit/ Loan from shareholder
• MCA issue Exemption notification for Private Limited Companies on 05th June, 2015 states that:

'Chapter V, clauses (a) to (e) of sub-section (2) of section 73, Shall not apply to a private company which accepts from its members monies not exceeding one hundred per cent, of aggregate of the paid up share capital and free reserves, and such company shall file the details of monies so accepted to the Registrar in such manner as may be specified.”

• MCA issue Exemption notification for Private Limited Companies on 13th June, 2017 states that:

'Chapter V, clauses (a) to (e) of sub-section (2) of section 73, Shall not apply to a private company which fulfils all of the following conditions ; namely-

• which is not an associate or a subsidiary company of any other company
• if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower; and
• such a company has no default in repayment of such borrowings subsisting at the time of accepting deposits under this ”

However, one can opine that

B. PROCESS - ACCEPTANCE OF LOAN FROM SHAREHOLDER:

If private limited company wants to accept loan from the shareholders, then such company have to follow the following below mentioned procedure.

STEP-1

To check whether company falls in exemption limit of 05.06.2015 or 13.06.2017 to calculate the amount which such company can accept from shareholders.

STEP-2

• To Hold a Meeting of Board of Director u/s 179(3)
• To Pass Board Resolution for Borrowing
• To issue notice for calling of General Meeting u/s 73(2)

STEP-3

• To Hold a Meeting of Shareholders u/s 73(2)
• To Pass ordinary resolution to accept loan from shareholder

STEP-4

• Company shall file e-form DPT-3 every year for such loan on or before 30th

C. TREATMENT- LOAN FROM SHAREHOLDER:

Where to mention loan from shareholder in e-form DPT-3? As e-form DPT-3 divided under four remote buttons:

i. Onetime Return for disclosure of details of outstanding money or loan received by a company but not considered as deposits in terms of rule 2(1)(c) of the Companies (Acceptance of Deposits) Rules, 2014

ii. Return of Deposit

iii. Particulars of transactions by a company not considered as deposit as per rule 2 (1) (c) of the Companies (Acceptance of Deposit) Rules, 2014

iv. Return of Deposit and Particulars of transactions by a company not considered as deposit

As per provisions mentioned above Private Limited Company can accept loan from shareholders subject to exemption of compliance of Section 73(2) provision (a) to (e). However, such loan from shareholder is nowhere mentioned under exemption list of definition of Deposit.

First

Therefore, one can opine that,

Loan received from shareholder shall be considered  as  deposit  for  Private Limited  Company.  However,  such  PVT  Company  can  accept  the  same  subject to above mentioned exemptions.

Second

• As loan from shareholder shall be considered as deposit even for private limited companies.
• Therefore, if companies having loan from shareholders as on March 31, they have to select remote button 2 i.e. ‘Return of Deposit’ to show this amount.
• One can opine that to show loan from shareholder Company always will select Remote Button 2 or Remote Button no. 4.
• Company has to attach certificate of Statutory Auditor for the same.

D. CONSEQUENCIES

a) Fine on Contravention on Section 73

The company shall,

• in addition to the payment of the amount of deposit or part thereof and
• the interest due,
• be punishable with fine which shall not be less than one crore rupees or twice the amount of deposit accepted by the company, whichever is lower rupees but which may extend to ten crore rupees; and
• every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years and with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees,

b) Punishment for non filing of DPT-3: Rule 21

The Company and every officer of the company who is in default shall be punishable with fine which may extend to five thousand rupees and where the contravention is a continuing one, with a further fine which may extend to five hundred rupees for every day after the first day during which the contravention continues.