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maximum loan that a private company can take

Neha Ganatra (article) (42 Points)

11 February 2011

hello, i wanted to know if there any limit or ratio that a private company has to maintain for taking secured or unsecured laon. the company that i am enquiring about has a very low share capital of Rs. 500,000.

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A Body Corporate can give loan or guarantee to another exceeding 60 % of its paid up capital ( till called up) and 100% of its free reserves. Free reserves; Free reserves shall include Dividened Distribution reserve , Dividened Distribution reserve & Credit of Securities premium account as per Previous Year Audited Balance sheet and shall not include Share application money account.

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Jayashree S Iyer (Company Secretary) (3224 Points)
Replied 11 February 2011

No limits on borrowing or ratio between secured and unsecured loans specified in the Companies Act. However the creditors at the time of lending will definitely consider the debt equity ratio.

However in the case of a public company or a subsidiary of a public company, where the moneys to be borrowed together with the moneys already borrwed will exceed the aggregate of the paid up capital of the company and its free reserves, then the consent of the members in general meeting is required as per Section 293(1)(d).

CS Ankur Srivastava (Company Secretary & Compliance Officer) (17853 Points)
Replied 12 February 2011

Originally posted by : Jayashree S Iyer
	No limits on borrowing or ratio between secured and unsecured loans specified in the Companies Act. However the creditors at the time of lending will definitely consider the debt equity ratio. However in the case of a public company or a subsidiary of a public company, where the moneys to be borrowed together with the moneys already borrwed will exceed the aggregate of the paid up capital of the company and its free reserves, then the consent of the members in general meeting is required as per Section 293(1)(d).