Is Special Resolution needed Loan From Directors by a Private Limited Company 4 times the net worth.
This query is : Resolved
26 June 2025
The Net Worth of a Private Limited Company is Rs. 100000. Its taking a loan from its director of Rs. 400000. Is Special Resolution needed for this purpose or Board Resolution would suffice. Moreover is MGT 14 needs to be filled ??
12 August 2025
Great question! Let me clarify the requirements for loans from directors to a private limited company when the amount exceeds net worth:
Scenario:
Private Limited Company with Net Worth = ₹1,00,000
Loan taken from director = ₹4,00,000 (i.e., 4 times net worth)
Key Points & Legal Provisions:
Whether Special Resolution is required?
Section 185 of the Companies Act, 2013 deals with loans to directors, but your case is loan from director to company, so Section 185 does not restrict this.
Section 186 (Loans and Investments by Company) applies here. According to Section 186(2), a company cannot give loans or guarantees or provide security exceeding 60% of paid-up share capital, free reserves, and securities premium (or 100% in some cases) without shareholder approval.
However, loan from directors to the company is generally considered a borrowing, not a loan given by the company, so Section 186 restrictions on loans given do not apply.
No explicit statutory requirement to pass a Special Resolution for a director loan to the company even if it exceeds net worth.
Board Resolution is sufficient to approve borrowing from directors unless the Articles of Association (AoA) provide otherwise.
Is MGT-14 (Filing of Resolutions with ROC) required?
Board Resolution for borrowing funds does not require filing MGT-14.
If a Special Resolution is passed, it needs to be filed in MGT-14 within 30 days.
Since no special resolution is required here, MGT-14 filing is not mandatory for Board Resolution approving director loan.
Scenario:
Private Limited Company with Net Worth = ₹1,00,000
Loan taken from director = ₹4,00,000 (i.e., 4 times net worth)
Key Points & Legal Provisions:
Whether Special Resolution is required?
Section 185 of the Companies Act, 2013 deals with loans to directors, but your case is loan from director to company, so Section 185 does not restrict this.
Section 186 (Loans and Investments by Company) applies here. According to Section 186(2), a company cannot give loans or guarantees or provide security exceeding 60% of paid-up share capital, free reserves, and securities premium (or 100% in some cases) without shareholder approval.
However, loan from directors to the company is generally considered a borrowing, not a loan given by the company, so Section 186 restrictions on loans given do not apply.
No explicit statutory requirement to pass a Special Resolution for a director loan to the company even if it exceeds net worth.
Board Resolution is sufficient to approve borrowing from directors unless the Articles of Association (AoA) provide otherwise.
Is MGT-14 (Filing of Resolutions with ROC) required?
Board Resolution for borrowing funds does not require filing MGT-14.
If a Special Resolution is passed, it needs to be filed in MGT-14 within 30 days.
Since no special resolution is required here, MGT-14 filing is not mandatory for Board Resolution approving director loan.
12 August 2025
Thank you so much sir for your reply. You explained this issue so well.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- GSTR-1A How to update Invoice
- Excess salary payment.
- Capital gain from sale of house property
- Stamp Paper for partnership firm change new income tax 2025
- TDS on Purchase of Immovable Property by NRI from NRI
- INTEREST APPLICABLE ON ITC REVERSAL PORTION
- Current Account Opening for Sole Proprietorship with Udyam Certificate - Zero Turnover
- Regarding TDS Applicability For Director Remuneration
- Annual return in Gst
- Value of property in capital gain
- TDS APPLICABILITY......
- Copyright software
- Cash gift by grand mother to her grand daughter
- Tax amount diff in Gstr1 and 3B in tax compare reports
- Tds on GST in connection with sale to public company
- Restoration of certificate of practice
- Regarding change in correspondence address in SSP portal
- No Compliences after incorporation
- USEFUL LIFE OF USED/SECOND HAND COMMERCIAL VEHICLES
- Claiming TDS deducted by builder on Hardship compensation and Corpus
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
CAclubindia
