Loans from Directors

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VINITHA RAJESH

VINITHA RAJESH (Querist)
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14 March 2011 Are there any restrictions for taking loan from a director by a Private Limited Company.

Please advice

Ravikant

Ravikant (Expert)
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14 March 2011 RESTRICTIONS ON ACCEPTING OF LOAN FROM DIRECTORS APPLY TO PUBLIC LTD. CO, & NOT TO PVT. LTD.CO

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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15 March 2011 Restriction is on advancing loan to directors by a pvt ltd co u/s 292 and not on taking loan.

A public and private 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. The above is exempt from the deposit rules, 1975.

But if a private company take unsecured loans from persons other than its shareholders, directors and their relatives the same would be considered as a violation of section 3(1)(iii) of the Companies Act, 1956 as the same would be considered as public deposit under section 58A read with Companies (Acceptance of Public Deposit) Rules, 1975.

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