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Loan by huf member

subramaniam (manager - finance & accounts) (24 Points)

16 July 2019

Hi,

My boss is a partner of a Firm (XYZ Corporation) and he is a member of HUF.

Can he allowed to give a loan / advance with or without interest to employee of that firm (XYZ Corporation)..?

Please clarify.

Subramaniam.P

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4 Replies

Ravi SADhiyan (Practice) (4510 Points)
Replied 16 July 2019

Yes he can give loan to employee

Suresh Thiyagarajan (Student) (3986 Points)
Replied 16 July 2019

1. Partnership firm and HUF have very restrictions with respect to transactions, unlike companies which are governed by Companies Act.
2. The above amount of loan provided by your boss (being a partner and member ) is not in his capacity as a partner or a member of HUF but in her Individual capacity. So, he is free as an individual to provide loan to any person as per his wish and interest on the same will be based on his discretion.
3. So the possible question of conflicts of interest unlike in companies will not arise in here. There is nothing wrong in providing loan to another person (the loan was provided to him not in his capacity as an employee) in his/her individual capacity and charging of interest or not is upon the person who is providing the loan.
Please correct me if the above solution has an alternative view.