Waiving of Loan

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sayeeda (Querist)
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20 April 2009 Hi
Can a public company waive the loan due from directors. What are the consequences.
Can the company declare dividend and adjust the balance due from directors against the dividend to be paid by the company and pay the dividend distribution tax.

Thank u
Regards
CA Sayeeda

sundharabahu

sundharabahu (Expert)
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20 April 2009 the remitting or waivig, or extending time period of a loan due from director cannot be allowed except where there is permission from shareholders obtained in general meeting. If waived, it amounts to contravention of provision of section 293 of the companies act, 1956.
as per section 205, the dividend is to be paid only in cash ( or by cheque,warrant). two exceptions are - issue of bonus shares or set off for the amounts due on account of calls in arrear from member. As such, the company is not rigt in setting off dividend amount for the dues from directors.