02 August 2025
This is an important compliance question under the **Companies Act, 2013** and **Companies (Acceptance of Deposits) Rules, 2014**. Here's a clear explanation for each part of your query.
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### ✅ **Scenario Recap:**
* Company Type: **Private Limited** * Authorised Capital: ₹1 lakh * Outstanding Unsecured Loan: ₹25,000 from a **shareholder**, continuing for **many years** * You want to understand implications under **Companies Act, 2013** and what actions are required.
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## 🔹1. **Whether the unsecured loan from shareholder is a "deposit"?**
Under the **Companies (Acceptance of Deposits) Rules, 2014**, loans from **shareholders** are exempt from being treated as deposits **only if**:
> 🔹 The **shareholder** is a **registered member** of the company at the time of giving the loan. > 🔹 The shareholder furnishes a **declaration** in writing that the loan is not being given out of **borrowed funds**.
📌 **Rule Reference:** Rule 2(1)(c)(vii) of Companies (Acceptance of Deposits) Rules, 2014
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### ✅ **If both conditions were satisfied at the time of accepting the loan**, then:
* The loan is **not treated as a deposit** * **No action required** to return the loan or file DPT-4 * No audit qualification necessary
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### ❌ **If conditions were NOT satisfied:**
If either:
* the lender was not a registered shareholder **at the time**, or * **no declaration** was taken
Then it **was treated as a deposit** under CA 2013, and the company should have:
* Filed **Form DPT-4** (intimation of existing deposits by 30 June 2014) * **Returned the deposit** within 3 years from 01 April 2014 (i.e., by 31 March 2017) or earlier as per terms
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## 🔹2. **If the company still continues the loan in balance sheet:**
* It may amount to **non-compliance** with **Section 74** (if it was a deposit). * The **auditor** may be required to **report a qualification** in the audit report under **CARO** and **Schedule III** disclosures. * There can be penalties under **Section 76A** and **73** (including fines and imprisonment).
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### 📝 Suggested Action:
1. **Review records:**
* Check **whether the shareholder was a member** at the time loan was given. * Check for **declaration** from shareholder.
2. **If both were in place**:
* No compliance needed. * Maintain records for audit/reference.
3. **If any condition missing**:
* You can consider **converting the loan into share capital** (subject to valuation & board/shareholder resolution). * Or consider **repayment** of the loan if still possible. * Take **legal opinion** to defend continuation if repayment is impractical.
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## 🔹3. **About Share Application Money:**
If your balance sheet still shows **share application money pending allotment**, you should ensure that:
* Shares are **allotted within 60 days** of receiving the money * Otherwise, refund should be made within **15 days** after 60 days * **Failure** to do so = money is treated as **deposit** (as per Rule 2(c)(xii))
> ⚠️ This **does attract auditor qualification** and may lead to penalties under **Section 42 & 76A**
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### 🔍 References:
* [Rule 2 of Companies (Acceptance of Deposits) Rules, 2014 – Bare Act](https://www.mca.gov.in) * [Section 73 & 74 of Companies Act, 2013 – MCA Portal](https://www.mca.gov.in)
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### 📌 Summary Table:
| Situation | Compliant Loan? | Action Required | | ------------------------------------------------------------------ | --------------- | ------------------------------------------------ | | Loan from existing shareholder + declaration of non-borrowed funds | ✅ Yes | No action needed | | No declaration or not a shareholder | ❌ No | File DPT-4 (if still pending), repay, or convert | | Share application money pending for >60 days | ❌ No | Allot shares or refund. Else, it’s a deposit |
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Let me know if you want a **template declaration** or **DPT-4 filing procedure**.
CAclubindia
