Loan to director

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Prashant Parekh (Querist)

04 June 2018 Mr. X is a Director of ABC which is a public company. Can ABC co take a loan for purchase of car by Mr. X for his personal use.Mr. X does not hold any shares in ABC co and he is a non executive Director. Please advice.

Regards
Prashant Parekh

CS Mitesh Mehta

CS Mitesh Mehta (Expert)

06 June 2018 Amounts received from directors are loans and not deposits if the directors give the amount out of his own sources and not borrowed funds and give a certificate to that effect to the company. In such a case a company may accept loans from directors without interest too.
However, if the director gives the money out of borrowed funds, it would be deposit and provisions of section 76 read with Companies (Acceptance of Deposit) Rules 2014 would be applicable and only eligible companies can take such a deposit within the specified limits. An Eligible Company is a Public Company which has either minimum Net-Worth of Rs. 100 crores or Turnover of Rs. 50 Crores.
Crores

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