private company loan

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Querist : Anonymous

Querist : Anonymous (Querist)

09 December 2009 can a private company accept a secured loan from its director?
wat are the relevant sections?

Ankur Garg

Ankur Garg (Expert)
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09 December 2009 Yes a private company can accept secured loan from its director. Compliance of section 125 is necessary.

Such loan would not be treated as public deposit.

Querist : Anonymous

Querist : Anonymous (Querist)

09 December 2009 can you tell me more about this? urgently please

Ankur Garg

Ankur Garg (Expert)
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10 December 2009 Hi,

INTER CORPORATE LOANS

Kindly appreciate, 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.

A public and private 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 â€œdeposit 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 from other corporate 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.

LOAN FROM INDIVIDUALS/OUTSIDERS

Kindly appreciate, A private limited company can take unsecured loan from its shareholders, directors and their relatives and the same would not be covered under section 58A and other deposit provisions as such transaction is exempt by 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 deposit under section 58A read with Companies (Acceptance of Public Deposit) Rules, 1975.

Regards