Ad-Free CAclubindia and Daily Updates on your mobile. Subscribe Now!

Director and share holder

ASHISH VIJAY (ACCOUNTS MANAGER) (29 Points)

21 December 2010

CAN A SHARE HOLDER OF PVT LIMITED COMPANY HAVE MORE SHARE THEN DIRCECTOR?

AND CAN SHARE HOLDER GIVE INTREST FREE LONE TO COMPANY?

Reply
Follow
Share

8 Replies

HARDIK (COMPANY SECRETARY NCFM (Corporate Governance )) (664 Points)
Replied 21 December 2010

Yes Shareholder can take more share than director and for interest free loan you can take notional interest.

Upgrade to CAclubindia Pro. Subscribe Now!

Venkateswara Rao Sapare (Accountant) (1500 Points)
Replied 21 December 2010

A share holder of a private limited company can lend a loan subject to the payment of interest from the receiving company. A interest - free - loan can not be given to the company by the share holder. It is not permitted even from the Income Tax aspect.

CA ASHISH GUPTA (FCA, LL.B., MBA) (390 Points)
Replied 21 December 2010

YES for both the questions

ankit jain (CS trainee) (152 Points)
Replied 21 December 2010

Yes for ur 1st question......a shareholder can hold more share than the director.

But for answering ur 2nd ques i need the reason y do u want to do so..??

In my point of view no shareholder can do so. It attracts lots of income tax complications and company law as well does not allow it.

if i am wrong then pls correct me.

CA ASHISH GUPTA (FCA, LL.B., MBA) (390 Points)
Replied 21 December 2010

@ Ankit Ji, There is no provision under companies act, which prevents to take loan from shareholders.

Now come at income tax.. There is no problem in case of companies, as it increases income of company.

It is a general practice to introduce shareholders loan to avoid dividend tax, when there is positive cash inflows.

I have deal with many cases of interst free loan by shareholders and no addition of income in shareholders hand.

1 Like

Upgrade to CAclubindia Pro. Subscribe Now!

Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 21 December 2010

.Yes a shareholder can hold more shares than a director. In fact the Companies Act doesn't contain any provision requring a director to hold any shares other than qualification shares if any prescribed under the articles of the company

As regards interest free loans from shareholders, the company can avail it.

1 Like

Syam kamal (Company Secretary) (156 Points)
Replied 21 December 2010

Originally posted by : Jayashree S Iyer
	.Yes a shareholder can hold more shares than a director. In fact the Companies Act doesn't contain any provision requring a director to hold any shares other than qualification shares if any prescribed under the articles of the company As regards interest free loans from shareholders, the company can avail it.

Agree with Jayashree madam... Companies Act doesn't prohibit taking interest free loan from shareholder. Both scenario stated by the querist is possible.