Loan from director


Self employed

Can a director give unsecured loan to a company so that company can refund share application money.

 
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Yes, madam A director can give loan to a company, however he has to give a undertaking that the amount he is giving is from his own funds not from borrowed funds.


Total likes : 2 times

 
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Self employed

Hello Gaurav ji,

Thanks for ur prompt reply.

But i have further query. Can a member also give loan to the company? 
In Deposit Rules 2014 member is not mentioned with a director like it was mentioned in previous 1975 rules.

 
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CA Final Student

@ Gaurav Sir

 

How will the director proof that the funds given are from its own sources? and where in companies act 2013 it is written that director can give loan from its own sources

 

Please provide the source.

 

Thanks

 
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Dear Akanksha,

 

Please refer to the definition of deposits under companies Act 2013,

it has a clause which states

 

Deposit includes any receipt of money by way of deposit or loan or in any other form, by a Company.

Following amount received shall not be considered Deposits under this Chapter

8)      Any amount received from a person who at the time of receipt was a director provided the director furnishes a declaration that the amount given is not out of borrowed funds.

 

So from above it is clear that Director has to give a undertaking for the same.

 

Now the question is about how he declare that the money was from his own funds:-

It is not company job to acretain whether the amount received was from director own funds or borrowed funds. for that company ask for a declaration from a Director that loan given is from his own funds.

 

 
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CA Final Student

Thanks for yopur reply Gaurav Sir,

 

But fro director's safety point of view how will he proof.

 

Please refer my earlier ask question   

 

/forum/details.asp?mod_id=292701&offset=1#.U4zLSXaGeYQ

 
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Dear Akanksha,

 

A director would very well know that whether he has borrowed any amount or not from anyone.

He must be preparing his own individual Balance Sheet and that would be very conclusive evidence. 

Bank Statements would be other means.

 

One thing which i think is possible but i am not sure.

Also,

If suppose the Net worth of Director is 10 Cr and he has taken loan of Rs 5 crore from bank than he can advance a loan of 5 Cr to company.

 
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CA Final Student

please see y question sir and answer there

 
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I dont have  a answer at present, i ll study or have views from others on the same and then let you know.

 

please drop in your email id 

 
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sir can anyone provide me the format of declaration by Director for giving loan to Company please.

 

 
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