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IMPLICATION AND SUMMARY OF SECTION 58A TO PRIVATE COMPANIES:-

As per the provisions of Section 58A of the Companies Act, 1956; a private company can accept Deposits only from its Shareholders, Directors and there Relatives.

Meaning of “relative” (As per Section 6 of the Companies Act, 1956) :

A person shall be deemed to be a relative of another if, and only if :

(a) they are members of a Hindu undivided family; or

(b) they are husband and wife; or

(c) the one is related to the other in the manner indicated in Schedule IA.

SCHEDULE IA : LIST OF RELATIVES

1. Father

2. Mother (including step-mother)

3. Son (including step-son)

4. Son's wife

5. Daughter (including step-daughter)

6. Father's father

7. Father's mother

8. Mother's mother

9. Mother's father

10 Son's son

11.Son's son's wife

12.Son's daughter

13.Son's daughter's husband

14.Daughter's husband

15.Daughter's son

16.Daughter's son's wife

17.Daughter's daughter

18.Daughter's daughter's husband

19.Brother (including step-brother)

20.Brother's wife

21.Sister (including step sister)

22.Sister's husband

Deposits cannot be taken from any other persons by a private Company. Further Loan is also included in Deposits as per the provisions of Section 58A.

Loans from non-members, non-directors and their relatives would be considered a deposit attracting provisions of Section 58A.

Thus a Private Company can take unsecured loans only from Shareholders, Directors & there Relatives.

However it is to be noted that a private Company can take loan from other company and body corporate and the same would be covered under section 372A as an inter corporate loan. The above is exempt from the deposit rules, 1975.

As per the above provisions of Section 58A and Section 372A the following points can be summarized:-

1. A private Company can accept deposits and unsecured loans only from Shareholders, Directors & there Relatives.

2. A Private Company can take unsecured loans from any Body Corporate as the same are exempt from Deposit Rules,1975. However these are covered under the provisions of Section 372A and the procedure laid in Section 372A needs to be followed.

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