Accepetence of loans from relatives of directors

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sandeep reddy (Querist)

20 February 2014 can a public limited company accept loans from relatives of directors. if yes then what is the procedure and sections regarding this.

SHAKTI JINDAL

SHAKTI JINDAL (Expert)

21 February 2014 As per Rule 2(b)(ix) of the Companies (Acceptance of Deposits) Rules, 1975, “deposit” means any deposit of money with, and includes any amount borrowed by, a company, but does not include-

(ix) any amount received from a person who, at the time of 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 the 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.

Since loans from a relative of director is not included in ‘public deposits’, a public limited company may avail the same, subject to the furnishing of requisite declaration in accordance with the above proviso.

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