Company law

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

04 November 2011 can a private company accept deposits.
If no, can they accept loans.
If yes, can it pay interest on it.
TDS applicablity etc
Please answer.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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04 November 2011 As per section 3(1)(iii)(d) of the Companies Act, 1956 a Pvt. Limited Company is prohibited from inviting or accepting deposits from persons other then its members, directors or their relatives.

For definition of the term deposit see section 58A and also Companies (Acceptance of Deposits) Rules, 1975. You can check these from below links---

https://www.vakilno1.com/bareacts/companiesact/s58A.htm

https://www.mca.gov.in/Ministry/actsbills/rules/CAoDR1975.pdf

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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04 November 2011 A private limited company can take unsecured loan from its shareholders, directors and their relatives and the same would not be covered under section 58A and other deposit provisions as such transaction is exempt by deposit rules 1975.

But if a private company takes unsecured loans from persons other than its shareholders, directors and their relatives the same would be considered as deposit under section 58A read with Companies (Acceptance of Public Deposit) Rules, 1975.

Further private limited 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.

It can also take loan from Banks/PFIs under the same section 372A as an inter-corporate loan.

For details see the exemptions from the ambit of deposit given in "Companies (Acceptance of Deposits) Rules, 1975" from the link given above.

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CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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04 November 2011 And yes you can pay interest on the loan taken from members, directors or their relatives and you will also be required to deduct TDS thereon u/s 194A.

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