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unsecured loan from outsider by private company. (Corporate Law)

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This query is : Resolved

Author : Anonymous

( Author )
18 May 2012

Can a private company accept unsecured loan from a person other than its shareholders,Directors and their relatives.

Please refer the Section and Act.

Please refer the section and Act for DEPOSIT and UNSECURED LOAN.


Siddhartha Bhardwaj

( Expert )
18 May 2012

The Companies Act prohibits a private company from accepting DEPOSITS from persons other than shareholder, directors or their relatives.

However, a private company can take unsecured loan from any person.


B.Chackrapani Warrier

( Expert )
18 May 2012

Rule 2 (b) of Companies (Acceptance of Deposits) Rules, 1975 is extracted below:-

(b) "deposit" means any deposit of money with, and includes any amount borrowed
by, a company, but does not include......

In view of the above, 'unsecured loan' is a 'deposit' and a private limited company is, therefore, prohibited to accept 'unsecured loans' from outsiders / general public.


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