Execution of loan documents by shareholders

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Shareholders of a private limited company can execute loan documents if authorised by the board of directors through a resolution. While company law typically designates Key Managerial Personnel (KMP), officers, or employees for signing, the board retains the ultimate power under Section 179 of the Companies Act, 2013, to delegate this authority to anyone, including a shareholder. This delegation ensures the company's ability to proceed with financial arrangements.

Chaitanyaa

Chaitanyaa (Querist)

09 September 2022 Sir,

Can shareholders of a private limited company execute loan documents on the basis of resolution.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

09 September 2022 Yes, as it's based on resolution.

Chaitanyaa

Chaitanyaa (Querist)

09 September 2022 Sir, As per CA-2013, only a KMP , or an officer or an employee can sign on behalf of Company. So can we regards shareholder as one of these? Regards

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

09 September 2022 No, I agree with you shareholder can't sign.

Adv. Ravish Bhatt, ADIT, CIOT

Adv. Ravish Bhatt, ADIT, CIOT (Expert)

15 September 2022 Shareholders don't have any authority to sign on behalf of company as it functions through board. however, in terms of s.179, board can exercise all powers including a power to authorise anyone(shareholder as well) to sign loan documents and in that case, shareholder can sign. s.21 says document may be authenticated by a key managerial person or by an officer duly authorised by board but that does not anyway restrict boards power to authorise anyone else for that purpose as ultimately board is supreme. I answer only for general purpose discussion.

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