Pankaj Devnani
Quick Summary
When the lines blur between personal and corporate finances, questions about conflicts of interest and fairness arise. Loans from directors and their relatives pose intriguing challenges, emphasizing the need to navigate this terrain with care and comprehension. The question here arises in the mi
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FAQ :
Yes, Indian corporate law, specifically the Companies (Acceptance of Deposits) Rules, 2014, exempts money received from directors or their relatives from the definition of deposits, and Section 179 grants the Board power to borrow funds. The Companies Act, 2013 does not prohibit such borrowing.
The lender must be a director at the time of receiving funds, the funds must be their own (not borrowed from others), and a written declaration to this effect must be provided to the company. The company must also disclose these funding details in its Board's Report.
A Board Meeting must be convened, and a Board Resolution passed. A declaration confirming the loan is from the director's own funds must also be obtained.
The company must file Form DPT-3 annually by 30th June, detailing these loans under 'Particulars not considered as deposits' as per audited financial statements. Fees apply, with penalties for delays.
The intention is to enhance accountability and not to prevent companies from raising debt funds from individuals closely associated with the company.
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