04 April 2023
A loan from shareholder of a Private Limited company will be considered as deposit u/s 73?
In view of Ministry of Corporate Affairs vide Notification No. G.S.R.. 583(E) dated 13th June, 2017, Only clauses (a) to (e) of sec 73(2) are exempt.
Does it need to pass SR? what are the other compliances? Can't such deposit be repayable on demand or upon receiving a notice within a period of less than six months? Its a short term funding/ convertible into RPS upon notice.
05 April 2023
As per Section 73 of the Companies Act, 2013, any amount received by a company from its shareholders, other than as a part of share capital, is considered as a deposit. However, the said section provides for certain exemptions from the definition of deposit, which are mentioned in clauses (a) to (e) of sub-section (2) of Section 73. Since the loan is being given by a shareholder of a private limited company, it will be considered as a deposit under Section 73 of the Companies Act, 2013, unless it falls under the exemptions provided in clauses (a) to (e) of sub-section (2) of Section 73. Regarding the requirement for passing a special resolution (SR), it is important to note that as per the aforementioned notification dated 13th June 2017, private limited companies are exempted from the requirement of passing a special resolution for accepting deposits from its members, up to a limit of 100% of the aggregate of the paid-up share capital, free reserves, and securities premium account. However, if the loan from the shareholder exceeds the above-mentioned limit, then a special resolution will be required to be passed by the company before accepting the same. In addition to the above, there are other compliances that need to be fulfilled by a private limited company accepting deposits from its members, such as filing Form DPT-3 with the Registrar of Companies (RoC), creation of a deposit repayment reserve, etc. As per the provisions of Section 74(1) of the Companies Act, 2013, a deposit accepted by a company shall be repayable on the expiry of the period for which the deposit was accepted, or on the demand of the depositor, whichever is earlier. Therefore, if the loan from the shareholder is repayable on demand or upon receiving notice within a period of less than six months, it will be considered as a short-term loan and will not be subject to the provisions of Section 73 of the Companies Act, 2013. However, if the loan is convertible into redeemable preference shares (RPS) upon notice, then it may be considered as a deposit under the Companies Act, 2013, and the relevant provisions of the Act will apply.
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