Loan from employee

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CS Vandana Kacholia (Querist)

25 July 2009 Can a private company accepts loan from its employee?? if yes/no plz mention logic behind this and applicable provisions??

Thanks & Regards
Vandana Kacholia

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)

25 July 2009 You cannot accept loan from an employee. The reason is it becomes a deposit as per RBI guidelines.

However you can accept loan from a shareholder eventhough he is an employee cum investor. As loan from shareholders is excluded from the definition of deposit.

Section 58A of the companies Act along with master circular on acceptance of deposits issued by RBI deals with acceptance of deposits by private company.

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CA.Tarun Maheshwari

CA.Tarun Maheshwari (Expert)

25 July 2009 Agree with the Views of expert. Loan from shareholders/directors are only allowed.

CS Vandana Kacholia

CS Vandana Kacholia (Querist)

26 July 2009 Thanks experts

Ankur Garg

Ankur Garg (Expert)

27 July 2009 Hi,

Also go through the position in case of public company and same is also applicable in your query as your case involves private company+employee.

A public limited company can take loan from other company and body corporate and the same would be covered under section 372A as an inter corporate loan.

A public company can also take loan from Banks/PFIs under the same section 372A as an inter corporate loan.

But if such company take loan from an individual the same would be considered as public deposit under section 58A read with Companies (Acceptance of Public Deposit) Rules, 1975.

As per the definition of deposit given in Rule 2 of the said rules “deposit means any deposit of money with and include any amount borrowed by, a Company but does not include certain amounts.

There are certain amounts which are not considered as deposit as per the rules above and such amount includes inter corporate transaction hence amount taken by company/bank and PFI are not considered as deposit.

On the other hand amount taken by public company from individual is not covered in the exemption given by the said rule, hence amount taken by public company from individual is considered as deposit under section 58A read with Companies (Acceptance of Public Deposit) Rules, 1975.

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CS Vandana Kacholia

CS Vandana Kacholia (Querist)

27 July 2009 Thanks

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