From PVt ltd co bank account we have transferred Rs.10000 to its directors bank account which have been returned by director via cheque to the compnay in 3 days. How will i book this entry in PVt co accounts? Should i trate it as loan to directors?
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Payment of rs.10000 to director
Replies (1)
Extract of Section 185 of Companies Act 2013 is as follows,
Loan to directors, etc. 39
185 . (1) Save as otherwise provided in this Act, no company shall, directly or indirectly40, advance any loan40, including any loan represented by a book debt, to any of its directors or to any other person in whom the director is interested or give any guarantee or provide any security in connection with any loan taken by him or such other person:
Provided that nothing contained in this sub-section shall apply to—
| (a) | the giving of any loan to a managing or whole-time director— |
| (i) | as a part of the conditions of service extended by the company to all its employees; or | |
| (ii) | pursuant to any scheme approved by the members by a special resolution; or |
| (b) | a company which in the ordinary course of its business provides loans or gives guarantees or securities for the due repayment of any loan and in respect of such loans an interest is charged at a rate not less than the bank rate declared by the Reserve Bank of India. |
Hence, the amount of Rs.10,000 is to be treated as loan to directors, subject to the fist proviso of 185(1).
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