Loans from director
Querist : Anonymous
Can Mr. X, who is an Auditor of Company M/s B, grant loan to M/s B?
Ans: No, Pursuant to the provisions of section 226(3) (d) of Indian Companies Act 1956, a company can not appoint any person/firm to be its auditor who/which owes amount exceeding INR1000 by way of direct Indebtness OR Guarantee OR Security in connection with Indebtness to third party..
Deposits in case of Private Limited Company
Private Company is prohibited to accept any invitation or acceptance of unsecured loans/deposits from the persons other than its members, directors or their relatives. Therefore a private company can accept deposits through private arrangement from its members, directors and their relatives.
Rule 2(b)(ix) exempt any unsecured loan money received from directors and shareholders from the definition of deposits. According to Rule 2(b)(ix), any amount received from members of a private company limited by guarantee are not exempt.
Rule 3 of Companies (Acceptance of Deposits) Rules, 1975 deal with the limit upto which a company can accept deposits/ loans. Private company exempted this limit.
For any invitation and acceptance of unsecured loan/deposits from relatives of directors and member, the company will have to file a statement in lieu of advertisement in accordance with the provisions of Rule 4A of the Companies (Acceptance of Deposits) Rules, 1975. The company will also have to file annual return of deposits in accordance with Rule 10.
Consequences of acceptance of deposit by Private Limited Company
If a private company acceptance an amount, which may be classified as deposit under section 58A read with Companies (Acceptance of Deposits) Rules, 1975, it will cease its status of a private company and has to make all the compliances for such deposits as per the requirement of said rules, as well as to comply with all the provisions as may be applicable on public limited company such as section 58A, 58AA, 58AAA, 81, 256, 257, 198, 268, 269, Schedule XIII, 274(i)(g), 295, 297, 300, 301, 372A, etc
Querist : Anonymous
Yes a company can give loan to inter company.
You pass a Board Resolution under section 292 of the Companies Act, 1956.
A company A can give loan or take loan from company be whether director or auditor are same in both companies.
Querist : Anonymous
In above case, auditor of company B is also a director of Company A.
and director is responsible for giving loan ( i mean to say he has a say while deciding the loan to other company)
If he is in a board for a company which is providing loan to the company where is auditor, how could we say the auditor will exercise his duty independently ?
The provision of interested director will not apply to private limited company.
In case of public limited company, he will not participate in the meeting and other director will proceeds the loan procedure.
The opinion of auditor will not be considered in it. Other partner of of Audit Firm will be taken for compliance purpose.
The question was can a Company A give loan to Company B..........my answer is yes, because the Companies Act 1956 not restrict Company A to give loan to Company B. (This is my opinion as per my knowledge).
No one can stop anybody from doing legitimate business dealing
but every except of such transaction will have to be looked in. If the company provides loan to other company, audit work should not be taken
anyway good debate on a good topic
thank you Ajay Ji
Thanks For sharing valuable experiences.
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