Section 58A Public Deposits

This query is : Resolved

Mohammed (Querist)
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28 December 2010 QUERY 1:
X, Y and Z are the share holders and directors of XYZ Pvt Ltd

XYZ Pvt Ltd is a holding company of A Pvt ltd, B Pvt ltd, C Pvt ltd and D Pvt Ltd

If X, Y and Z gives loan to A Pvt ltd, B Pvt ltd, C Pvt ltd and D Pvt Ltd, will it attract the provisions of 58A or not?

Note: X, Y and Z are not the directors and shareholders A Pvt ltd, B Pvt ltd, C Pvt ltd and D Pvt Ltd

QUERY 2:
P, Q and R are the share holders and directors of 10 private companies and partners of a LLP.

Can a LLP give loan to the 10 private companies in which P, Q and R are the shareholders and directors?

On both the above cases, i need to know if there is any Sec 58A violation or any violation under the companies act.

Jayashree S Iyer

Jayashree S Iyer (Expert)
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28 December 2010 Answer to Query 1

Yes it will attract Section 58A. Loans from members or directors alone is not considered a "Deposit" as per Companies Acceptance of Deposit Rules, 1975.

Answer to Query 2

Loan by LLP to 10 private companies will be a "Deposit".

Mohammed

Mohammed (Querist)
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28 December 2010 Dear Jayashree,

Thanks a lot for the assistance..

But what is the Limit for an LLP and how many Pvt Company it can invest which will not be considered as Deposit??

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Jayashree S Iyer

Jayashree S Iyer (Expert)
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28 December 2010 Dear Mohammad,

Loan by LLP to a private company will be considered a deposit.

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