Permissible Loan by Private Companies from Shareholders, Directors and Their Relatives
- Under Companies Act, 1956 it was allowed to accept loan from the Shareholders and such loan considered as non-deposit.
- Under Companies Act, 2013 since 01st April, 2014 it was not allowed to accept deposit from shareholder
- MCA issue Exemption notification for Private Limited Companies on 05th June, 2015 states that:
Chapter V, clauses (a) to (e) of sub-section (2) of section 73, Shall not apply to a private company which accepts from its members monies not exceeding one hundred per cent, of aggregate of the paid up share capital and free reserves, and such company shall file the details of monies so accepted to the Registrar in such manner as may be specified i.e. DPT-3.”
- MCA issue Exemption notification for Private Limited Companies on 13th June, 2017 states that:
Chapter V, clauses (a) to (e) of sub-section (2) of section 73, Shall not apply to a private company which fulfils all of the following conditions ; namely-
(A) which accepts from its members monies not exceeding one hundred per cent. of aggregate of the paid up share capital, free reserves and securities premium account; or(B) which is a start-up, for five years from the date of its incorporation; or(C) which fulfils all of the following conditions, namely:-
(a)which is not an associate or a subsidiary company of any other company
(b) if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower; and(c) such a company has no default in repayment of such borrowings subsisting at the time of accepting deposits under this section.”
Summary of Notifications concluded as follows:
|
S.
No. |
Date From
– To |
Provisions |
|
1. |
From 01-04-2014 To 05-06-2015
|
Not allowed to accept loan from shareholders |
|
2. |
From 05-06-2015 To 13-06-2017 |
Allowed to accept loan from shareholders upto 100% of
paid up share capital and free reserve (subject to exemption of some
compliances) |
|
3. |
From 13-06-2017 Till date |
Allowed to accept loan from shareholders any limit if
fulfill three conditions mentioned above. |
|
S. No. |
Entity
or Person |
Loan
Acceptance |
|
|
1 |
Director |
It
is allowed, provided a declaration is given by the director that the sum has
not been given out of funds acquired through him by borrowing or accepting
loans or deposits from others |
|
|
2 |
Relative
of Director |
It
is allowed as Ministry of Corporate Affairs through its notification dated
15.09.2015 has furnished that a private company could accept unsecured
loans apart from director also from a relative of Director providing the
relative of director from whom money is received, provides to the corporation
at the time of giving the money, a declaration in writing towards the effect
that the sum is not being given out of funds acquired through him by
borrowing or accepting loans or deposits from others as well as the
corporation shall disclose the details of money so accepted in the Board’s
report. The relative may not be a shareholder of the corporation |
|
|
3 |
Shareholders |
Where money accepted from members go
beyond 100% of the Paid-up share capital and free reserves. |
Where sum accepted from members
doesn’t go beyond 100% of the Paid-up share capital and free reserves. |
|
|
|
It is not allowed |
It is allowed subject to: Passing
a member’s resolution by making provision for security, relating to any for
due repayment of the sum of deposit accepted and interest thereon (not below
12.5% at present) which includes the creation of charge (Form CHG1) on the
property or assets of the Corporation. Filing the details of the money
accepted with the registrar. |
|
4 |
Relative
of Shareholders |
It
is not allowed as such a borrowing might take place nevertheless, subject to
the fulfilment of conditions as prescribed in Section 73 of the Companies
Act, 2013. |
|
|
5 |
An
individual who is Director and Shareholder Both |
It
is allowed, provided a declaration is given by the director that the sum has
not been given out of funds acquired through him by borrowing or accepting
loans or deposits from others. |
|
|
6 |
Employee |
It
is allowed, the sum borrowed should not exceed the employees’ annual salary
in the nature of interest-free security deposit. |
|
By
CS Diwakar Agrawal
Mob: +91-9911746549
