Director give unsecured loan to co.

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pooja Garg

pooja Garg (Querist)
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29 May 2017 Hi,

Please give suggestion, Director of Pvt. Co. Can Give unsecured loan to Pvt. co. or not????

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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01 June 2017 Amounts received from directors are loans and not deposits if the directors give the amount out of his own sources and not borrowed funds and give a certificate to that effect to the company. In such a case a company may accept loans from directors without interest too.

However, if the director gives the money out of borrowed funds, it would be deposit and provisions of section 76 read with Companies (Acceptance of Deposit) Rules 2014 would be applicable and only eligible companies can take such a deposit within the specified limits. An Eligible Company is a Public Company which has either minimum Net-Worth of Rs. 100 crores or Turnover of Rs. 50 Crores. A private company cannot accept such loan from the director.

In such a case if the director is a shareholder also then, section 73 (2) read with Companies (Acceptance of Deposit) Rules 2014 would be applicable and it would be treated as deposit from shareholder.