Loan from Private Family Trust

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A private limited company can generally take a loan from a private family trust, provided the trust is a shareholder. If the trust isn't directly a shareholder, the trustee can hold shares on behalf of the trust. To facilitate the loan, it's recommended to first issue an equity share to the trust, making it an official shareholder before proceeding with the loan.

lalit

lalit (Querist)
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10 August 2021 Can a Private limited company having share capital take a loan from a Private Family Trust ?

Please advise .......................................

CS Divesh Goyal

CS Divesh Goyal (Expert)
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10 August 2021 1. If such private Family trust is shareholder of Company. Then loan is allowed.

CS Divesh Goyal

CS Divesh Goyal (Expert)
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10 August 2021 2. But Practically in mostly cases, Trust are not shareholders of Company. On behalf of trust, trustee shall be shareholder of the Company. in these type of scenerio it will not allow.

lalit

lalit (Querist)
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10 August 2021 So should we first make trust a shareholder by issuing them one equity share?

CS Divesh Goyal

CS Divesh Goyal (Expert)
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13 August 2021 Yes, First issue shares to Trust make trust as shareholder then you can do the same.

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