Unsecured loans as per companies act,2013
This query is : Resolved
27 May 2015
Can Unsecured Loan from HUF be Considered as Loan from Directors as Per (New) Companies Act,2013
27 May 2015
No. It will not be considered as loan from Directors.
Message likes :
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30 May 2015
Thank you So much Sir !
30 May 2015
In cases 1) if the karta is a Director of Company and other coparceners aren't !
2) If Everyone is a Director of the company !
and Does Key Management Personnel applicable here in relation to HUF ?
2) If Everyone is a Director of the company !
and Does Key Management Personnel applicable here in relation to HUF ?
04 June 2015
In cases 1) if the karta is a Director of Company and other coparceners aren't ! 2) If Everyone is a Director of the company ! and Does Key Management Personnel applicable here in relation to HUF ?
Read more at: https://www.caclubindia.com/experts/modify_message.asp?entry_id=982871
Read more at: https://www.caclubindia.com/experts/modify_message.asp?entry_id=982871
02 August 2025
This is a nuanced query relating to **unsecured loans from HUF** under the **Companies Act, 2013**, especially when the **Karta of the HUF is also a director** of the company.
---
### 🔍 **Core Question:**
> Can an unsecured loan received from an HUF be considered as a loan from a **director**, if the **Karta of the HUF is a director** of the company?
---
## ✅ **Answer Overview:**
### 🔹 **As per Companies Act, 2013**:
An **HUF** is a separate legal entity from its **Karta**. Even though the **Karta may be a director** of the company, **a loan from HUF is not treated as a loan from director**.
---
## 🧾 **Detailed Case-wise Analysis:**
### ✅ **Case 1: Karta is a Director, other coparceners are not**
* Even if the **Karta is a director**, the HUF is **not equivalent to the director himself**.
* Therefore, **loan from HUF is treated as a loan from a third party**, **not** a loan from director.
* Hence, **it will be considered a "deposit"**, unless it qualifies under the exemptions in the **Companies (Acceptance of Deposits) Rules, 2014**.
> 📌 **Conclusion**: Not exempt — **must comply with deposit provisions**.
---
### ✅ **Case 2: All Coparceners are Directors**
* Even if **all members of the HUF are directors**, the **loan from HUF is still not treated as a loan from directors** individually.
* HUF is an entity separate from the individuals who compose it.
* The **only way it could be exempt** is if **loan is given in personal capacity by a director**, **not by HUF**.
> 📌 **Conclusion**: Same as above — **loan from HUF ≠ loan from director**.
---
## 🔹 **What If the Loan Was from Director (in personal capacity)?**
If a **director gives a loan in their personal capacity** (not through HUF), then:
* It **may be exempt from "deposit"** under **Rule 2(1)(c)(viii)** of Companies (Acceptance of Deposits) Rules, 2014.
* Conditions:
1. Director gives a declaration that **funds are not borrowed**.
2. Company discloses loan in **Board's Report**.
---
### ❓ **Does “Key Managerial Personnel (KMP)” apply to HUF?**
* The term KMP is defined in **Section 2(51)** of the Companies Act, 2013.
* KMP includes CEO, CFO, CS, MD, WTD, etc. — it applies to **individuals only**, **not HUFs**.
* So, **HUF cannot be considered a KMP**.
---
## 📌 Summary Table
| Scenario | Loan From Director? | Treated as Deposit? | Remarks |
| --------------------------------------------- | ------------------- | ------------------- | ----------------------------------- |
| HUF gives loan (Karta is Director) | ❌ No | ✅ Yes | Treated as 3rd party loan |
| HUF gives loan (All members are Directors) | ❌ No | ✅ Yes | Still HUF ≠ Directors |
| Director gives personal loan with declaration | ✅ Yes | ❌ No | Exempt under Rule 2(1)(c)(viii) |
| Loan from HUF without declaration | ❌ No | ✅ Yes | Must comply with deposit provisions |
---
### 📚 **Relevant Provisions**:
* **Companies Act, 2013**
* **Rule 2(1)(c)** of the **Companies (Acceptance of Deposits) Rules, 2014**
* **Section 73 to 76A** (relating to Deposits)
* **Section 2(31)** – Deposit Definition
* **Section 2(51)** – Key Managerial Personnel (KMP)
---
Let me know if you need a **draft of director’s declaration** or help checking deposit compliance for your case.
---
### 🔍 **Core Question:**
> Can an unsecured loan received from an HUF be considered as a loan from a **director**, if the **Karta of the HUF is a director** of the company?
---
## ✅ **Answer Overview:**
### 🔹 **As per Companies Act, 2013**:
An **HUF** is a separate legal entity from its **Karta**. Even though the **Karta may be a director** of the company, **a loan from HUF is not treated as a loan from director**.
---
## 🧾 **Detailed Case-wise Analysis:**
### ✅ **Case 1: Karta is a Director, other coparceners are not**
* Even if the **Karta is a director**, the HUF is **not equivalent to the director himself**.
* Therefore, **loan from HUF is treated as a loan from a third party**, **not** a loan from director.
* Hence, **it will be considered a "deposit"**, unless it qualifies under the exemptions in the **Companies (Acceptance of Deposits) Rules, 2014**.
> 📌 **Conclusion**: Not exempt — **must comply with deposit provisions**.
---
### ✅ **Case 2: All Coparceners are Directors**
* Even if **all members of the HUF are directors**, the **loan from HUF is still not treated as a loan from directors** individually.
* HUF is an entity separate from the individuals who compose it.
* The **only way it could be exempt** is if **loan is given in personal capacity by a director**, **not by HUF**.
> 📌 **Conclusion**: Same as above — **loan from HUF ≠ loan from director**.
---
## 🔹 **What If the Loan Was from Director (in personal capacity)?**
If a **director gives a loan in their personal capacity** (not through HUF), then:
* It **may be exempt from "deposit"** under **Rule 2(1)(c)(viii)** of Companies (Acceptance of Deposits) Rules, 2014.
* Conditions:
1. Director gives a declaration that **funds are not borrowed**.
2. Company discloses loan in **Board's Report**.
---
### ❓ **Does “Key Managerial Personnel (KMP)” apply to HUF?**
* The term KMP is defined in **Section 2(51)** of the Companies Act, 2013.
* KMP includes CEO, CFO, CS, MD, WTD, etc. — it applies to **individuals only**, **not HUFs**.
* So, **HUF cannot be considered a KMP**.
---
## 📌 Summary Table
| Scenario | Loan From Director? | Treated as Deposit? | Remarks |
| --------------------------------------------- | ------------------- | ------------------- | ----------------------------------- |
| HUF gives loan (Karta is Director) | ❌ No | ✅ Yes | Treated as 3rd party loan |
| HUF gives loan (All members are Directors) | ❌ No | ✅ Yes | Still HUF ≠ Directors |
| Director gives personal loan with declaration | ✅ Yes | ❌ No | Exempt under Rule 2(1)(c)(viii) |
| Loan from HUF without declaration | ❌ No | ✅ Yes | Must comply with deposit provisions |
---
### 📚 **Relevant Provisions**:
* **Companies Act, 2013**
* **Rule 2(1)(c)** of the **Companies (Acceptance of Deposits) Rules, 2014**
* **Section 73 to 76A** (relating to Deposits)
* **Section 2(31)** – Deposit Definition
* **Section 2(51)** – Key Managerial Personnel (KMP)
---
Let me know if you need a **draft of director’s declaration** or help checking deposit compliance for your case.
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