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Can a director of a co take a loan and then give it co

anita (trainee) (514 Points)

21 May 2018

Can a director of a private limited company take a loan from some one and then give this loan to the company?

If the answer is NO then what will be the repurcussions of this ?

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9 Replies

CA Sunil Kumar (Chartered Accountant) (4524 Points)
Replied 21 May 2018

Under section 73 to 76 of company act prohibit the company for accepting deposit and Loan from directors if he has not given loan out of his own funds (Borrowed Fund) is covered under the definition of deposits.
Your case covered in above section. loan given by director to company will be deemed deposit because loan given out borrowed fund and section 73 to 76 shall become applicable.

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CA S Praveen Kumar Reddy (Chartered Accountant) (2195 Points)
Replied 21 May 2018

See section 185-186

CA Sunil Kumar (Chartered Accountant) (4524 Points)
Replied 21 May 2018

If a company violates the provision of section 73 to 76 or Rules made there under then the company shall be repay the amount of deposits and interest thereon along with the penalty of Rs. 1 Cr. This may extend to 10 Cr.

Every officer of the company who is in default shall be punishable with –

7 years of imprisonment, or

Penalty from 25 lacs to 2 cr.,

anita (trainee) (514 Points)
Replied 22 May 2018

Will the other board of directors will also get punished if they are not aware about the loan ?

What is we issue shares from these borrowed funds ?

CA Sunil Kumar (Chartered Accountant) (4524 Points)
Replied 22 May 2018

1. Only those who is in default.
2. Not possible (What is we issue shares from these borrowed funds ?)

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anita (trainee) (514 Points)
Replied 22 May 2018

I meant that instead of showing it as a loan from director can we issue shares to the director

Because as per my knowledge director cannot borrow funds to give loan to the company but he can buy share capital from borrowed funds.

CA Sunil Kumar (Chartered Accountant) (4524 Points)
Replied 22 May 2018

It is possible only if following two condition satisfied:,
1. Loan obtained from director prior to 01.04.2014 and same is disclosed in in the notes to its financial statement for the financial year commencing on or after 1st April, 2014 the figure of such amounts and the accounting head in which such amounts have been shown in the fi nancial statement.
2. Pursuant provisions of Section 62(3) of the Companies Act 2013 the unsecured loans can be converted in to share capital if at the time of obtaining the loan it should have been approved by special resolution mentioning terms & conditions that the loan shall be converted in to equity capital at a future date.

anita (trainee) (514 Points)
Replied 22 May 2018

thank you for your reply

Shea Townsend (Id et culpa sed id tempora voluptates explicabo) (22 Points)
Replied 21 July 2018

The director of the institute is taking loan for the building of the home. The request of the loan and top 10 writing services is completed for the flow of the engagements for the humans. The purpose is advanced for the flow of the items for the humans in life.