11 June 2014
a declaration in writing from directors 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 is necessary to be taken in first board meeting & also to be file in MGT-14?
25 July 2024
Yes, the declaration in writing from directors stating that the amount being given (presumably as a loan) is not being provided out of funds acquired by borrowing or accepting loans or deposits from others is a crucial requirement under certain provisions of the Companies Act, 2013. Here’s a breakdown of the process:
### Declaration Requirement
1. **Purpose:** - The declaration serves to ensure transparency and compliance with legal provisions that regulate the provision of loans by companies to their directors.
2. **When to Obtain:** - The declaration should ideally be obtained during the first board meeting where the decision to provide the loan is discussed and approved. - It should explicitly state that the director receiving the loan is not obtaining funds for the loan from external sources such as loans or deposits.
3. **Filing with MGT-14:** - According to Section 117(3)(g) of the Companies Act, 2013, certain resolutions passed by the board of directors, including those involving loans to directors, need to be filed with the Registrar of Companies (RoC) using Form MGT-14. - The declaration from directors should accompany Form MGT-14 when it is filed with the RoC. This ensures that the RoC has a record of the declaration as part of the compliance process.
### Steps to Follow:
- **Board Meeting:** Conduct the first board meeting where the decision to provide a loan to a director is discussed. - **Declaration:** Obtain a written declaration from the director receiving the loan stating that the funds are not sourced from borrowing or loans/deposits from others. - **Filing MGT-14:** Prepare and file Form MGT-14 with the RoC. Ensure that the declaration is attached or included as part of the submission.
### Compliance and Legal Importance:
- Ensuring that the declaration is obtained and filed appropriately with MGT-14 helps in meeting regulatory requirements. - It also helps in preventing misuse of company funds and maintains transparency, which is critical under corporate governance principles.
### Conclusion:
Obtaining a declaration in writing from directors regarding the source of funds for loans received is essential during the initial board meeting where the loan decision is made. This declaration must accompany the filing of Form MGT-14 with the Registrar of Companies. It ensures compliance with legal provisions and promotes transparency in corporate dealings. Always consult with a legal or compliance expert for precise guidance tailored to your specific situation and jurisdiction.
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