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Rent Deposit to director

16 March 2023

My query is whether a pvt Ltd company can give security (rent) deposit to it's director for taking the office premises on rent which is registered in the name of directors

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4 Replies

Ayush (Executive ) (6132 Points)
Replied 16 March 2023

No, a private limited company cannot give a security deposit for an office space that is registered in the name of its director. This is because the director is considered to be a related party, and any transaction with a related party must be done at arm's length and on a commercial basis.

Therefore, if the company is taking office premises on rent, it should be in the name of the company and not the director. Additionally, the company should pay the security deposit directly to the landlord or the property owner, and not to the director.

sabyasachi mukherjee (25988 Points)
Replied 16 March 2023

No a private limited company.

Chirag (Professional) (1979 Points)
Replied 17 March 2023

Office Rent is an Ordinary course of business and any deposit is also a kind of general transaction,you have to just check that it's at Arms Length Price,else Board approval or Shareholders approval may required .

Jatin Bajaj (CS) (2928 Points)
Replied 04 May 2023

The Rent Agreement should be in the name of the Company and not in the name of Directors, as any non compliance may result the directors personally liable for the consequences arising out of the breach of the Agreement.

Further giving rent to the director for office purpose, a Board resolution needs to be passed after checking the condition that if it is in the ordinary course of business and is at arm's length price.