Use of money of pvt ltd company by both directors for self

This query is : Resolved

sejal (Querist)
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01 August 2013 dear expert sir/madam,
Me and my friend started a consultancy firm as a pvt. ltd company.only two of us are the director of company for 50:50%. i want to ask when we earn money than after paying tax and all the expenses like ( payments of directors, payment of employees, rent, other expenses). can we both director the remaining money for self as we want if yes than how ? because we both want to buy home and our all money is coming to our company account.

Ajay Mishra

Ajay Mishra (Expert)
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02 August 2013 Hi

First of all the profit of the company is use for the business of the company and its shareholders in the form of dividend.
Dividend is distributed out of profit of the company to its shareholders and not to the directors.

The directors of the company will be entitled to the salary and other benefits if it is approved by the Board of Directors in its meeting subject to the provisions of company's articles.

sejal

sejal (Querist)
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03 August 2013 thank u for your reply sir, but in this company only we two are the owner/director/shareholder of the company. in this condition what we can do

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Got it — since both of you are the **only directors and shareholders (owning 50-50%)** of the private limited company, here’s how you can legally use the company profits for personal purposes like buying your homes:

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### How directors/shareholders can get money from the company for personal use:

#### 1. **Salary or Director’s Remuneration**

* You can pay yourselves a **salary or director’s fees** as per the company’s Articles and with Board approval.
* This salary is a business expense, subject to tax as your personal income.
* Must comply with Companies Act and Income Tax Act rules (e.g., limits on remuneration without shareholder approval).

#### 2. **Dividend Distribution**

* After paying all expenses, taxes, and setting aside reserves, the **company can declare dividends** to shareholders (which in your case, both of you 50-50).
* Dividends are paid out of **profits after tax**.
* Dividends are taxable in the hands of shareholders as per the current tax laws.

#### 3. **Loan to Directors**

* The company can **give loans or advances to directors**, but this is heavily regulated under the Companies Act (Section 185).
* Loans to directors are generally prohibited except under very specific circumstances (e.g., loans to managing director or whole-time director for certain purposes).
* If you opt for this, you must comply strictly with legal provisions.

#### 4. **Reimbursement of Expenses**

* If you incur expenses on behalf of the company, you can claim reimbursement.

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### What you *cannot* do:

* Just **withdraw company funds casually for personal use** without following legal procedures.
* Use company money for personal home purchase directly without formal distribution or loan.

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### Practical suggestion:

* Declare profits.
* Hold a Board Meeting and Shareholders Meeting to **declare dividend**.
* Pay dividends to yourselves as shareholders.
* Use that dividend money personally.
* Or pay yourselves reasonable salary/director fees.

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### Important points:

* Maintain **proper records** of salary, dividends, or any loans.
* Comply with **Income Tax and Companies Act** provisions.
* Consult a **company secretary or CA** for preparing Board resolutions and compliances.

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