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Section 58a of companies act, 1956 (LAW)

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( Author )
28 June 2013

Can a director of private limited company be covered U/S 58A of Companies Act , 1956 if he ceases to be the director of the company?


rupesh jain

( Expert )
28 June 2013

PVT LTD CO CAN TAKE LOAN FROM DIRECTOR AND SHARE HOLDER AND ITS RELATIVES



Ajay Mishra

( Expert )
28 June 2013

Hi


Deposits in case of Private Limited Company

Private Company is prohibited to accept any invitation or acceptance of unsecured loans/deposits from the persons other than its members, directors or their relatives. Therefore a private company can accept deposits through private arrangement from its members, directors and their relatives.

Rule 2(b)(ix) exempt any unsecured loan money received from directors and shareholders from the definition of deposits. According to Rule 2(b)(ix), any amount received from members of a private company limited by guarantee are not exempt.

Rule 3 of Companies (Acceptance of Deposits) Rules, 1975 deal with the limit upto which a company can accept deposits/ loans. Private company exempted this limit.

For any invitation and acceptance of unsecured loan/deposits from relatives of directors and member, the company will have to file a statement in lieu of advertisement in accordance with the provisions of Rule 4A of the Companies (Acceptance of Deposits) Rules, 1975. The company will also have to file annual return of deposits in accordance with Rule 10.


Ajay Mishra

( Expert )
28 June 2013

Consequences of acceptance of deposit by Private Limited Company

If a private company acceptance an amount, which may be classified as deposit under section 58A read with Companies (Acceptance of Deposits) Rules, 1975, it will cease its status of a private company and has to make all the compliances for such deposits as per the requirement of said rules, as well as to comply with all the provisions as may be applicable on public limited company such as section 58A, 58AA, 58AAA, 81, 256, 257, 198, 268, 269, Schedule XIII, 274(i)(g), 295, 297, 300, 301, 372A, etc.


After resigning, he/she will be not covered under section 58A.


B.Chackrapani Warrier

( Expert )
28 June 2013

Not covered u/s 58A , because he/she should be a Director only at the time of accepting the deposit.


Charu Singh

( Author )
29 June 2013

Sir,
AS rule 2(b)(ix) of Companies (Acceptance of Deposits) Rules, 1975 reads as
"deposit" means any deposit of money with, and includes any amount borrowed
by, a company, but does not include-
"any amount received by a private company from a person who, at the time
of the receipt of the amount, was a director, relative of director or
member:
Provided that the 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;
My question to you is that as the director of a private company is barred by this rule for making deposit, can he be covered U/s 58A of companies act,1956 if he ceases to be the director of the company?


Ajay Mishra

( Expert )
29 June 2013

No, the director of the public company as well as private company is not barred after their resignation from the post of director.

The directors is not covered under section 58A,if the company taking loan from them.


Ajay Mishra

( Expert )
29 June 2013



Rule 2(B) (ix) of the the Companies (Acceptance of Deposits) Rule, 1975 is defind as follow:

“Any amount received by a private company from a person who at the time of the receipt of the amount, was a director, relative of director or member.”

In exercise of the powers conferred by Section 58A read with sub-clauses (a) and (b) of Sub-section (1) of Section 642 of the Companies Act, 1956 (1 of 1956), the Central Government, in consultation with the Reserve Bank of India, hereby makes the following rules further to amend the Companies (Acceptance of Deposits) Rules, 1975, namely:-

1 . Companies (Acceptance of Deposits) Amendment Rules, 2004.-

1.Short Title and Commencement - (1) These rules may be called the Companies (Acceptance of Deposits) Amendment Rules, 2004.

(2) They shall come into force on the date of their publication in the Official Gazette.

2. In rule 2 of the Companies (Acceptance of Deposits) Rules, 1975, in clause (b), for sub-clause (ix), the following sub-clause shall be substituted, namely:-

" (ix) 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".


After this amendments in this rule as on 12/03/2004 the public company can take money from its director because the word private company has been replace in this sub clause by the word “ the Company”.


Charu Singh

( Author )
29 June 2013

Sir,
If in case private company has already accepted deposit from director, can he claim his money back u/s 58A sub-section 3(a), if he ceases to be director?


Ajay Mishra

( Expert )
29 June 2013

He can take his money as loan but not as deposits.


Charu Singh

( Author )
29 June 2013

Okay Sir. Thank you so much for resolving my query. :)


Ajay Mishra

( Expert )
29 June 2013

My Pleasure................


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