Unsecured loan by pvt. co.

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Querist : Anonymous

Querist : Anonymous (Querist)

11 September 2013 -AOP can be member ?

- if pvt company has taken unsecured loan from AOP , what i should do i ) allot share to AOP or ii) allot share to all member of AOP to save from non compliance of 58A

Ajay Mishra

Ajay Mishra (Expert)
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11 September 2013 Generally the AOP is not considered as shareholder of the company. However, the members of that association can becomes a share holders of the company. You can treat AOP same as Partnership firm/HUF with respect to deposit. The AOP/Partnership Firm/HUF is not a legal entity, so the provision will be applicable on same.

Ajay Mishra

Ajay Mishra (Expert)
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11 September 2013
Deposits in case of Private Limited Company

Private Company is prohibited to accept any invitation or acceptance of unsecured loans/deposits from the persons other than its members, directors or their relatives. Therefore a private company can accept deposits through private arrangement from its members, directors and their relatives.

Rule 2(b)(ix) exempt any unsecured loan money received from directors and shareholders from the definition of deposits. According to Rule 2(b)(ix), any amount received from members of a private company limited by guarantee are not exempt.

Rule 3 of Companies (Acceptance of Deposits) Rules, 1975 deal with the limit upto which a company can accept deposits/ loans. Private company exempted this limit.

For any invitation and acceptance of unsecured loan/deposits from relatives of directors and member, the company will have to file a statement in lieu of advertisement in accordance with the provisions of Rule 4A of the Companies (Acceptance of Deposits) Rules, 1975. The company will also have to file annual return of deposits in accordance with Rule 10.

Ajay Mishra

Ajay Mishra (Expert)
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11 September 2013
Consequences of acceptance of deposit by Private Limited Company

If a private company acceptance an amount, which may be classified as deposit under section 58A read with Companies (Acceptance of Deposits) Rules, 1975, it will cease its status of a private company and has to make all the compliances for such deposits as per the requirement of said rules, as well as to comply with all the provisions as may be applicable on public limited company such as section 58A, 58AA, 58AAA, 81, 256, 257, 198, 268, 269, Schedule XIII, 274(i)(g), 295, 297, 300, 301, 372A, etc

Ajay Mishra

Ajay Mishra (Expert)
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11 September 2013
Acceptance of deposit by a private company from HUF:—
(a) If all members of HUF are also the directors of private company, such private company can accept deposits/unsecured loans from HUF. This case will be covered under rule 2(b)(ix) i.e. such a deposit is an exempted deposit.
(b) If all members of HUF are not the directors of a private company i.e. some of them are the partners and remaining are shareholders, still private company can accept unsecured loan/deposit from HUF. This case will be covered under rule 2(b)(ix) i.e. such a deposit is an exempted deposit.
(c) If there are some members of HUF who are not the shareholders of a private company, still private company can accept deposits from HUF. This case will not be covered under rule 2(b)(ix).

Ajay Mishra

Ajay Mishra (Expert)
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11 September 2013
Deposits from Partnership firm
Acceptance of deposit by a private company from a partnership firm:—
(a) If all partners of the firm are also the directors of a private company, such private company can accept unsecured loans/deposits from the firm. This case will be covered under rule 2(b)(ix) i.e. such a deposit is an exempted deposit.
(b) If all partners of a firm are not the directors of a private company i.e. some of them are the directors and remaining are the shareholders, still private company can accept deposit from the firm.
(c) If all partners of a firm are not the directors of a private company i.e. some of them are the directors, some of them are shareholders and remaining are relatives of a partners who is a shareholder. This case is not covered under rule 2(b)(ix).
(d) Where some partners are directors in a private company and remaining partners are not their relatives, private company cannot accept deposits from such firm.

Querist : Anonymous

Querist : Anonymous (Querist)

12 September 2013 thanks sir for such a detailed analysis. for HUF and Partnership firm I did as you wrote and I was taking AOP on the same footing but want to confirm. Your reply is really helpful. thanks

Ajay Mishra

Ajay Mishra (Expert)
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12 September 2013 My pleasure.............

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