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unsecured loan from outsider by private company.

This query is : Resolved 

Querist : Anonymous (Querist) 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.

CA 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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