Interest on unsecured loan in case of private ltd company

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ca monika jain (Querist)
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06 December 2013 dear sir
I want to ask that if a private limited company is paying interest to unsecured loans (taken from shareholders, directors or their relatives), such interest will be prejudicial to the interest of its stakeholders or not?
please give reasons for your answer.
thanks

Ajay Mishra

Ajay Mishra (Expert)
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06 December 2013 As per my views it will not be against the other shareholders.

Rule 2(b)(ix) exempts any amount received by a company from its shareholder from the definition of deposits. The shareholder shall furnish a statement to the company at the time of bringing in the money that the money has not been borrowed or accepted by him from other sources, to make deposit with the company.

As per amendments made in rule 3(1)(c), on 29th Sept., 2003, a company covered by the said Rules can pay interest not exceeding the rate prescribed by the Reserve Bank of India for deposits accepted by the Non Banking Financial Companies. This rate is 11% p.a. which may be paid or compounded at rests which shall not be shorter than monthly rests w.e.f. 4th March, 2003 as per RBI Circular No. DNBS. 165/CGM (CSM)-2003 & Circular No. DNBS. (PD) CC. No./02.01/ 2002-03 dated 3rd March, 2003. The above ceiling rate of interest of 11% p.a. is also applicable to the deposits accepted/renewed by Miscellaneous Non-Banking Companies (chit fund companies) as per the directions prescribed by RBI.

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ca monika jain

ca monika jain (Querist)
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08 December 2013 thanks sir.

Ajay Mishra

Ajay Mishra (Expert)
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08 December 2013 My Pleasure....

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