Unsecured loan

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Shikha gupta (Querist)
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28 June 2012 Can a Private limited Company lend money to a Partnership firm?
If yes then what formalities or procedure to be followed?

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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28 June 2012 A private company can give the loan to a partnership firm provided-
Firm is not related party and only surplus money can be given as a loan otherwise it may contravene the object clause of the MOA.

Shikha gupta

Shikha gupta (Querist)
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28 June 2012 Thank you so much Amit Sir.
I have one query more regarding this , in case one of the director is a partner in the partnership firm to which company wants to give unsecured loan or make a investment, is it possible for the company to do that?

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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28 June 2012 how much % of share director holds in the company?

Shikha gupta

Shikha gupta (Querist)
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28 June 2012 Director has 50% share

CA CS Amit S. Kedia

CA CS Amit S. Kedia (Expert)
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28 June 2012 It will be deemed dividend u/s 2(22)(e) if the director is entitled to 20% or more of profits/loss of the firm.
However, dividend shall be limmited to accumulated profit.
Section 297 of companies act shall also get attracted.

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