Guys,
A director had made many loans to a private company for working capital out of funds he acquired by way of his proprietorship business. Are there any restrictions on paying interest to him ? Note that the company is a private company with only two directors who are the only shareholders as well as subscribers to the memorandum.
As far as the loan has been given for the purposes of business or profession establishing commercial expediency there is no problem even if it is an interest free loan.
It has to be seen whether the director/the proprietory concern lending loan has any relationship with the private company to which the loan has been lent in which case there are chances of provisions of deemed dividend getting attracted.
O P Bagla & Co LLP
New Delhi
CA Inter
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