unsecured loan from shareholders' relatives

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Rajeswar (Querist)
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19 December 2009 A private company has taken unsecured loans from the relatives of the shareholders. Will the same be considered as deposit under section 58A read with Companies (Acceptance of Public Deposit) Rules, 1975?

kindly do clarify me.

regards

RAJA RAJESWARI S

Ankur Garg

Ankur Garg (Expert)
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21 December 2009 Hello,

Yes the same would be considered as public deposit.

However unsecured loan taken from the relative of director of a private company is exempt from the definition of public deposit.

Rgards

Rajeswar

Rajeswar (Querist)
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22 December 2009 Sir will the above amount to violation of Sec. 3(1)(iii) of the companies act which prohibits acceptance of deposits from public by a private company? If so, how to proceed?

Kindly clarify.

regards

RAJA RAJESWARI S

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CS Pawan Kumar Baid

CS Pawan Kumar Baid (Expert)
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28 December 2009 Well, following is exact text of exemption under clause (ix):
"Any amount received from a person who, at the time of the receipt of the amount, was a director of the company or any amount received from a RELATIVE OF A DIRECTOR OR ITS MEMBER by a private company."

It means relative of member of private company is exempted, provided he submits a declaration under Notification GSR 189(E) 12-Mar-04

Regards
Pawan KUmar Baid

Ankur Garg

Ankur Garg (Expert)
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28 December 2009 Disagree

Dear Pawan ji you are simply misinterpreting the clause. This is not the exact clause. You miss the most inportant comma after "was a director of the company". Check yourself.

Next time be careful. There is no room for any sort of discussion. It is very much a settled rule that unsecured loans from the relatives of the shareholders is a public deposit.

Regards