Can a shareholder give a loan to the company? is this possible at all? if not, is there a specific provision under the Companies Act, 1956 that prevents this?
Lekha Balakrishnan (Lawyer) (56 Points)
22 August 2008Can a shareholder give a loan to the company? is this possible at all? if not, is there a specific provision under the Companies Act, 1956 that prevents this?
Vidya
(Student)
(789 Points)
Replied 25 August 2008
There is nothing that prevents a share holder from lending to the company. Same person can hold Shares as well as Debentures. Refer to the famous Solomon Vs. Solomon and company limited caselaw.
Lineesh James
(Company Secretary)
(30 Points)
Replied 30 September 2008
Yes, but at the time of availing such loan get a letter from such director or shareholder that the money was not borrowed by them for the purpose of lending it to the Company.
Otherwise, it will be treated as Deposits. Even though a private company can take deposits from Directors and Shareholders, in such a case, you will have to comply with Companies (Acceptance of Deposit) Rules.
Landmark Judgments: Important Provisions of the EPF & ESI Act interpreted by the Honorable Supreme Court of India
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