A private company which is a deemed public company accepted Rs. 47500 from its directors for some days. Is there any default as per the Companies Act, 1956. In case there is a default, how to make good such default.
Private Company is prohibited to accept any invitation or acceptance of unsecured loans/deposits from the persons other than its members, directors or their relatives. Therefore a private company can accept deposits through private arrangement from its members, directors and their relatives.
Rule 2(b)(ix) exempt any unsecured loan money received from directors and shareholders from the definition of deposits. According to Rule 2(b)(ix), any amount received from members of a private company limited by guarantee are not exempt.
Rule 3 of Companies (Acceptance of Deposits) Rules, 1975 deal with the limit upto which a company can accept deposits/ loans. Private company exempted this limit.
For any invitation and acceptance of unsecured loan/deposits from relatives of directors and member, the company will have to file a statement in lieu of advertisement in accordance with the provisions of Rule 4A of the Companies (Acceptance of Deposits) Rules, 1975. The company will also have to file annual return of deposits in accordance with Rule 10.
2. Consequences of acceptance of deposit by Private Limited Company
If a private company acceptance an amount, which may be classified as deposit under section 58A read with Companies (Acceptance of Deposits) Rules, 1975, it will cease its status of a private company and has to make all the compliances for such deposits as per the requirement of said rules, as well as to comply with all the provisions as may be applicable on public limited company such as section 58A, 58AA, 58AAA, 81, 256, 257, 198, 268, 269, Schedule XIII, 274(i)(g), 295, 297, 300, 301, 372A, etc
16 February 2013
Thanks Sir..here the company in question is deemed public company as it is the subsidiary of a public company. In such situation whether it will be permitted to borrow some cash from Directors. Please guide...
03 August 2024
For a subsidiary of a public company, borrowing from directors is subject to stringent regulations under the Companies Act, 2013. If the subsidiary is a public company, it must adhere to the restrictions and requirements specified in the Act, particularly under Sections 185 and 186. If it is a private company, the restrictions are less stringent but still require board approval.
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