Pre incorporation loans accountability in pvt ltd company

 

Dear

Please Clarify the issue regarding accounting treatment in books of accounts

As a Promoter Loans received from third parties on behalf of proposed Company and directly given for fixed assets purchase to the Vendor from the promoter account (Pre Incorporation period). After Incorporation of Company, Company wants to show third parties names in its books  as Unsecured loans by passing  Journal entry ( with resolution), Whether this transaction is violation to the Accounting principles or to any Act. ?

 

Replies (1)

In case of Private Limited Companies, as per the Companies Act, 1956, Loans can be taken only from the Directors, Relatives of Directors or Members of the Company. In the given case, there is violation of the provision of Companies Act, 1956 by showing the Loan as taken from Third parties (ie. other than Directors, Director's Relatives or the Shareholders).

 

 

Regards,

Devendra Kulkarni

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