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Loan from public

Murali (Articled Assistant) (76 Points)

23 September 2011

Hi Experts,

Can a Private Ltd company take loan from the Public? If yes, is there any legal formalities to be complied?

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11 Replies

Preet Kanwar Singh (Company Secretary) (161 Points)
Replied 24 September 2011

No, a pvt co cant take loan from public. It can take loan only from its members, directors and their relatives...

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valji (Accounts manager-MBA) (2150 Points)
Replied 24 September 2011

totally agree with above

Charu Srivastava (Company Secretary) (4210 Points)
Replied 24 September 2011

No , because according to Section 3(iii)(d) a Private Company is prohibited to invite and accept any deposits from persons other than its members, directors and other relatives.

Syam kamal (Company Secretary) (156 Points)
Replied 24 September 2011

Agreed wiith all

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 24 September 2011

As per section 3(1)(iii) a private Company is prohibited to invite or accept any deposit from the pesons other than its members, directors or their relatives.

Acceptance of deposit rules, 1975 also provides that that the deposit accepted by the private company from above persons shall be treated as exempted deposit.

Accordingly, under section 3(1)(iii) read with Acceptance of deposit Rules, 1975 a private company cannot invite or accept deposit other than its members, director or their relatives.

However, as far as loan is concern, it can accept loan from others as well.. but cannot invite from public.

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Preet Kanwar Singh (Company Secretary) (161 Points)
Replied 24 September 2011

Dear Ankur sir, As you said it can accept loan from others as well.. Plz clear dis point Also whthr it wl b treated as deposit as per sec 58a or not if it accept loan from a firm where one director is partner nd othr is outsider.?? or if partners r related to de directors.? or both de partners r directors of co.? Kindly clarify these three situations.... Regards..

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 24 September 2011

In any of the condition it will not be treated as deposit.

The provisions of deposits are not applicable on Private Company

In any of the condition it will be treated as unsecured loan.

Preet Kanwar Singh (Company Secretary) (161 Points)
Replied 24 September 2011

Thx sir... But i think the definition of relatives does not include 'PARTNERSHIP FIRM' So how we treat it as loan frm relatives of directors (if partnrs r relatives of dirctrs) Whthr we can assume dat partnrshp firm has no legal entity, it is the partners who make the firm so dats why they r considrd related or not..??

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 24 September 2011

Yes, loan from relative of Director.. Firm has no legal entity.

Murali (Articled Assistant) (76 Points)
Replied 24 September 2011

Thanks to all,

If a P Ltd Company is taking loan from the Director/Member/Relatives of them,

is there any ceiling on the Rate of Interest to be paid to them?

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Dhanush (Consultant) (35 Points)
Replied 25 September 2011

Dear Experts, same is the case with my friend. The Pvt Ltd has 2 directors and they want to include 40 of their friends as members. Is it possible ? what should be the minimum share to the share holders ? Any ceiling limit on their share ? Also the company wants to pay them interest/Dividend at the rate of 20% PER MONTH every month. Is it possible ?? The scheme proposed by the directors towards each member is as follows for each member who will invest 5000/- per month


Month	Amount taken as loan	Cumulative amount taken as loan	Interest @ 20% PER MONTH	Interest Amount Paid by the Company per Month
1	5000	5000	1000	1000
2	5000	10000	2000	2000
3	5000	15000	3000	3000
4	5000	20000	4000	4000
5	5000	25000	5000	5000
6	5000	30000	6000	6000
7	5000	35000	7000	7000
8	5000	40000	8000	8000
9	5000	45000	9000	9000
10	5000	50000	10000	10000
11	5000	55000	11000	11000
12	5000	60000	12000	12000
13	5000	65000	13000	13000
14	5000	70000	14000	14000
15	5000	75000	15000	15000
16	5000	80000	16000	16000
17	5000	85000	17000	17000
18	5000	90000	18000	18000
19	5000	95000	19000	19000
20	5000	100000	20000	20000
21	5000	105000	21000	21000
22	5000	110000	22000	22000
23	5000	115000	23000	23000
24	5000	120000	24000	24000

			300000	300000