Loans to private company

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k.c. palai (Querist)
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25 June 2014 Dear Learned Members,
Mr. A is a relative of a Director of a Private Company, PQR Pvt Ltd. Mr. A has given a loan of Rs. 1 Crore to the Company at different dates but all before 1st April, 2014. As per the Companies Act, 2013 all loans given by a Shareholder or a relative of a director to a Private Limited Company before 1st April, 2014 would now be treated as deposits and has to be repaid back within 1 year from the date of the commencement of the act (i.e., 1st April, 2014) or the due date of the loan whichever is earlier.

Mr. A is now appointed as a director of PQR Pvt Ltd (post 01.04.2014) and as a director gives a loan to the Company of Rs. 2 Crore by which the Company repay his amount of Rs. 1 croreback to him for the loans taken previously from him (now being treated as deposits).

Request you to guide me whether such arrangement is possible.

Thanks & Regards,
K C Palai

CA. Amit G. Chandani

CA. Amit G. Chandani (Expert)
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25 June 2014 This type of arrangement can be done. But, loan accepted before 01.04.2014 will still be treated as deposit. You need to file DPT-4 (Note that there is drafting error in Section 74) but on a safer side file DPT-4 before 30.6.14.
Loan from director will be exempted from deposit definition if a declaration has been taken form director that the loan advanced is of owned fund.