Loan & advance by director.
This query is : Resolved
CA Shalini Agrawal
(Querist)
06 February 2014
Can a director of a private company gives advance to the company under the new companies Act.
AVTAR SINGH
(Expert)
06 February 2014
Company can take but cant give loan to Directors.
CA Shalini Agrawal
(Querist)
07 February 2014
Thanks Avtar Sir.
Can you please tell me in which section/Rule the details is given and the limit upto which a director can give loan to the company and how can we certify this.
Can you please tell me in which section/Rule the details is given and the limit upto which a director can give loan to the company and how can we certify this.
AVTAR SINGH
(Expert)
07 February 2014
Section 3(1)(iii)(d) of Companies Act 1956 had put restriction on a private company on acceptance of deposits from persons other than its members, directors or their relatives. However, this Section now stands repealed w.e.f. 12.9.2013 and definitions of private company given in Section 2(68) and of public company given in Section 2(71) of Companies Act 2013 have come into force. Interestingly Sec.2(68) of new Act does not contain a clause similar to Sec.3(1)(iii)(d) of 1956 Act.
Chapter V of new Act dealing with deposits has not yet come into force. Hence we have to refer Sec.58A of 1956 Act with Rules framed thereunder.
Rule 2(b)(ix) of Companies (Acceptance of Deposits) Rules 1975 excludes from 'deposits':
[(ix) any amount received from a person who, at the time of the receipt of the amount, was a director of the company or any amount received from a relative of a director or its member by a private company:
Provided that the director, relative of a director or member, as the case may be, from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting from others;]
Hence loan received from Director will not be covered u/s 58A if above declaration is given.
Chapter V of new Act dealing with deposits has not yet come into force. Hence we have to refer Sec.58A of 1956 Act with Rules framed thereunder.
Rule 2(b)(ix) of Companies (Acceptance of Deposits) Rules 1975 excludes from 'deposits':
[(ix) any amount received from a person who, at the time of the receipt of the amount, was a director of the company or any amount received from a relative of a director or its member by a private company:
Provided that the director, relative of a director or member, as the case may be, from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting from others;]
Hence loan received from Director will not be covered u/s 58A if above declaration is given.
CA Shalini Agrawal
(Querist)
07 February 2014
Whether we required to give the detail seperatly in directors report or audit report.
AVTAR SINGH
(Expert)
07 February 2014
Not in directors report. If CARO is applicable then report it there.
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