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UNSECURED LOAN RECD BY A PUBLIC CO. FROM ITS DIRECTORS

26 June 2010

Can a public co. receive unsecured loans from its directors/their relatives directly without going into sec. 58A & allied laws?

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6 Replies

Mitali Agarwal (Company Secretary) (638 Points)
Replied 26 June 2010

This topic was already discussed in the Forum.

The reply was:

Loan from Directors by a Public Co. will not be considered as Public Deposit under sec 58A.

Rule 2 Clause IX of the Companies (Acceptance of Deposits) Rules, 1975 provides that the term deposit does not include:

any amount received from a person who, at the time of the receipt of the amount, was a director of the company or any amount received from a relative of a director or its member by a private company :

Provided that the director, relative of a director or member, as the case may be, from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting from others".

Please refer this link which will clear any doubt

https://www.thehindubusinessline.com/bline/2004/03/19/stories/2004031900620400.htm

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Mitali Agarwal (Company Secretary) (638 Points)
Replied 26 June 2010

Thus, it is concluded that a public co. can accept unsecured loans only from its directors without applicability of Section 58A.

But any amt. recd. by public Co. from relative of director will be considered as "deposit" under Section 58A.

CA. Prabudh Sharma (CA) (83 Points)
Replied 26 June 2010

Can a public co. receive unsecured loans from its SHAREHOLDERS / their relatives directly without going into sec. 58A & allied laws?

In my opinion - NO.

Pl. Confirm

Mitali Agarwal (Company Secretary) (638 Points)
Replied 28 June 2010

Originally posted by : Prabudh Sharma
	Can a public co. receive unsecured loans from its SHAREHOLDERS / their relatives directly without going into sec. 58A & allied laws? In my opinion - NO. Pl. Confirm