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

query regarding loan form directors

shibin.s.pullan (student) (116 Points)

16 December 2008

Is there any restrictions regarding the maximum amount of loan from Directors under any law??

Looking forward for your reply

Reply
Follow
Share

6 Replies

Hitesh Kothari (Article) (144 Points)
Replied 16 December 2008

Dear Shibin,

There is section 295 of co's Act dealing with loan to or from directors which provide that No Co can give any loan or guarantee to any of its D's.

Also Check on https://www.vakilno1.com/bareacts/companiesact/s295.htm

Thanks & Regards

Hitesh

Upgrade to CAclubindia Pro. Subscribe Now!

CA. Rajeev Aggarwal (Chartered Accountant) (3424 Points)
Replied 16 December 2008

Yes, Hitesh is right

shibin.s.pullan (student) (116 Points)
Replied 16 December 2008

My query is regarding the amount of loan which can be taken from the directors

Vrnanda (auditor) (110 Points)
Replied 17 December 2008

Hi Shibin,

Nice to meet you. The answer to your question is as follows:

a) As said by Hitesh, It is correct that no company is entitled to make any loan or give a guarantee or provide security from / to its directors (in brief).

b) but the same will not be applicable in the following cases:

i) if the company is a private limited or

ii) the company obtains prior approval from the Central Government.

iii) if the company is a banking company.

iv) As far as the amount of loan, i dont think there any limit in the amount

of loan to be taken.

Recap, any company can make a loan to the directors, with the prior approval from the central government. Whether approval wil be given or not is a different issue.

That is what Section 295 speaks about.

But as far as company's limitation to take loan from directors, it can go for a loan from directors with no limit.

In case you still have any doubt keep visiting my blog. More elobarated explanation wil be posted on my blog.

https://www.vrnanda.blogspot.com/

just give me a post when ever you get any query.

Regards,

V R Nanda