Can a share holder of private company also lends money

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Querist : Anonymous

Querist : Anonymous (Querist)

15 June 2013 Can a share holder of the Private company also lends Money as the Unsecured Loan to the Co.????

Ajay Mishra

Ajay Mishra (Expert)
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15 June 2013 Hi

Yes,

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.

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