if a company give loan to director?????
loan to director
(Guest)
Aman Jain
(Company Secretary in Practice)
(165 Points)
Replied 15 January 2010
yes,
in public co. with compliance of sec. 295 company can give loan to directors.
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 15 January 2010
CHECKLIST FOR MAKING LOAN TO DIRECTORS
Check whether exempting in sub-section (2) of section 295 available to you or not. If not, check whether:—
1. any loan has been made to:—
(a) any director of the lending company;
(b) any director of the holding company;
2. the previous approval of the Central Government has been obtained for making any loan to the director;
3. no loans, etc. were provided in contravention of the provisions of this section and the guidelines made by the Central Government in this regard;
4. approval of the Central Government is obtained after the lending company ceases to be an exempted company in respect of all future loans, guarantees and security given in connection with a loan or any renewals of earlier transactions;
5. provisions of sections 292 and 372A are complied with, if applicable;
6. necessary entries are made in the Register of Loans;
7. the requisite resolutions are recorded in the minutes of Board/Committee meeting, etc.
Ankur Garg
(Company Secretary and Compliance Officer)
(114773 Points)
Replied 15 January 2010
Application for approval of the Central Government
The Central Government has prescribed new e-Form 24AB vide Notification No. GSR 56(E) dated 10.02.2006 for seeking approval of the Government under this section.
It should be noted that no approval for the grant of loan to any director would be given by the Central Government for the purchase of furniture.
Enclosures
The application has to be submitted with following enclosures in the PDF files:
(1) Copy of the Board resolution indicating the proposal of the company, terms and conditions, interest of directors or relatives, if any, specifying rate of interest chargeable, the schedule and terms of repayment, the loan is not being made out of borrowed funds of the company.
(2) Any other major or important condition having bearing on the loan or financial position of the company.
(3) A declaration that company has not defaulted in making repayments to the investors as and when they become due to them.
(4) Copy of draft loan agreement.
(5) Declaration to the effect that funds proposed to be loaned are not required for its working capital requirements at least for a year.
(6) A declaration from the statutory auditor or a company secretary in whole-time practice that:—
(a) The company has not defaulted in:
— The repayment of any fixed deposits or part thereof or interest thereon;
— Payment of dividend;
— Redemption or repayment of debenture and timely payment of interest thereon;
— Redemption of preference shares; and
(b) The company is regular in filing all e-forms or returns as required to be filed under the Companies Act, 1956;
(c) The proposal is in conformity with the provisions of section 372A of the Companies Act, 1956;
(d) The company is not in any default on account of undisputed dues of the Central Government e.g. income tax, central excise etc. For this purpose, the status of disputed and undisputed dues shall be made available so as to enable the Ministry to form a view in the matter vis-a-vis the coverage thereof available and assessed against the Net Worth/Profits of the applicant company.
(7) Copy of member resolution containing specific approval of required members along with explanatory statement.
(8) List of directors of board of both the companies and disclosing inter-se interest if any.
(9) Copy of loan scheme for the employees of the company, if any.
(10) No objection certificate (NOC) or prior approval of public financial institutions or banks in case any term loan is subsisting.
(11) Copy of letter from bank or financial institutions wherein the company has been asked to furnish corporate guarantee or security for the loan sanctioned to the borrower company.
my friend told me that pvt co can lend money to its director if there is no transaction in the book of company means showing no profit or loss . is it rite or wrong?? i need expert advice on this thanks
i also want to know there is one company and one prop. firm
ABC co has two director A and B , B is wife of A
and in prop. firm A is prop
My question is Abc company can give money to prop. firm in which a director is prop. and if there is any point of dividend engaged in this .
I need expert advice on this
Pooja Rane
(Working)
(159 Points)
Replied 15 January 2010
but if its a pvt ltd co.... & d director is also a shareholder of more than 10% shares... then... be carefull... deemed dividend u/s 2(22)(e) of IT act can get attracted....provided its not an advance in ordinary course of business...
Pooja Rane
(Working)
(159 Points)
Replied 15 January 2010
yes... understand d meaning of substantial interest & benificial interest.. I think ur case is covered in it...
Nicky
(Chartered Accountant)
(245 Points)
Replied 15 January 2010
See Kundan Mr. Anup Garg gave u the company law complaince and Pooja Rane told u abt 2(22)(e) of the Income Tax Act..
Now for your specific query..
if there is no profit or loss that means there will not be any accumlated profits so even your company namely ABC lends to A or his prop firm 2(22)(e) wont get attracted and the lending wont be an issue..
RAMESH KUMAR SONTHALIA
(PROPRIETOR)
(24 Points)
Replied 14 July 2012
Can a company give in cash loan to its directors. Is there any violation of Income tax act.
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