Acceptance of Short term loans

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Shakthi

Shakthi

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15 July 2020 Dear Experts

Can a pub/ pvt ltd company borrow short term loans from its shareholders/ directors?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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15 July 2020 Yes, a shareholder can give loan to private company and private company can accept such loan subject to compliance with section 73 (2).
A private company can accept money as deposit or loan from a person who, at the time of the receipt of the amount, was a director of such private company or a relative of the director of private company. However, in such cases, the following conditions shall be satisfied:

(a) The said person 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 loans or deposits from others; and

(b) the company shall disclose the details of money so accepted in the Board’s Report.

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