Deposit from directors

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

30 June 2014 As per new company's act, a company can accepts loan from its directors -in other words at the time of receipt of loan, the giver of loan should be director then it should be treated as deposit.

My query is , can we interpret from the above that when loan is given, giver should be director but subsequently he/she may not be necessarily director i.e. even if person resign after this event of loan , such loans can not be treated as deposit.

Experts pl advice.

Querist : Anonymous

Querist : Anonymous (Querist)

03 July 2014 Dear Experts your advice is awaited

Asha Kanta Sharma online

Asha Kanta Sharma

(Expert)
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21 July 2024 Under the Companies Act, 2013 in India, there are specific provisions regarding loans taken by companies from their directors, which are distinct from deposits. Here’s a clarification based on your query:

1. **Loan from Directors vs. Deposit**:
- According to Section 73 of the Companies Act, 2013, if a company receives money from its directors, it may be treated as a deposit unless it falls under certain exemptions or conditions specified in the law.
- A loan from a director, at the time it is given, should meet the conditions laid down to avoid being classified as a deposit. These conditions include:
- The loan must be given by a director in his or her capacity as such.
- The company must pass a resolution in a general meeting authorizing the acceptance of the loan.
- The loan should be utilized only for the purposes specified in the resolution.
- If these conditions are met at the time the loan is given, the subsequent resignation of the director does not automatically convert the loan into a deposit. The critical point is the status of the loan at the time it was given and whether it met the exemption criteria under Section 73.

2. **Treatment after Resignation**:
- If the loan was received under the conditions specified in Section 73 and subsequently the director resigns, the company does not need to reclassify the loan as a deposit.
- The crucial aspect is the compliance with Section 73 requirements at the time the loan was extended. Once the loan is properly accounted for and documented as per the exemption criteria, the resignation of the director does not change its classification.

3. **Compliance and Documentation**:
- It is essential for the company to maintain proper documentation and compliance with the Companies Act, 2013 regarding loans from directors.
- The company should ensure that resolutions authorizing the acceptance of loans from directors are duly passed and documented in the minutes of general meetings.
- Any loans received should be clearly recorded in the books of accounts and disclosed appropriately in the financial statements of the company.

In summary, loans received from directors can avoid classification as deposits if they meet the specified conditions under Section 73 of the Companies Act, 2013 at the time of receipt. Subsequent events such as the resignation of the director do not alter this classification, provided all initial conditions were fulfilled.

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