Apart
from Bank Finance, a private limited company depends on internal sources (
which are its shareholders, directors and relative of directors) for its
investment and fund requirements.
Also,
private companies, unlike public companies, are prohibited from accepting
deposits from the public.
However,
the new Companies Act, 2013 has brought a major change in the borrowing
provisions and removed the shareholders and relative of directors from
the list of eligible lenders but after amendment in Rule dated
15.09.015, some relaxation has been given to private companies i.e. now
private company can accept monies from relatives of the director.
Regarding Loans by Private Limited Company, in brief, 3 categories
of loans have been prescribed under the Companies Act, 2013.
Loans which can be accepted eg Loan from
Directors, Loan from any other company, banking institutions etc.
Loans which can be accepted subject to complying with Deposit
Rules, The Deposit Rules are very complicated, demand a lot of
compliance and practically difficult to be followed. If these rules are
followed, the company can take loan from shareholders etc.
Loans which cannot be accepted eg. Private Company cannot accept
loans from any Partnership Firm, HUF etc
Below,
the provisions of Act have been stated in a more structured manner.
Please
be guided that the complex provisions of law have been simplified for easy
understanding of stakeholders.
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Loans from
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Conditions, if any:
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1.)
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Shareholder:
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Member: Yes, can accept, but subject to the condition
specified in deposit Rules2.
Promoters & Their Relative: Yes, can accept if
a.) The condition specified in Deposit
Rules2 is met or;
b.) If it is in stipulation of the requirement of
any lending Financial Institution (FI) or Bank. This Exemption is available
till the loan is not repaid.
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2.)
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Director/Relatives of Director
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Yes, can accept, but the director will give a Declaration in
writing that money is not given out of borrowed funds and company will
disclose it in the Board’s report.
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3.)
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Employee
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Yes, can accept up to the employee’s annual salary (
there should be a contract of employment with the company) in the nature of
non- interest bearing security deposit.
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4.)
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Any other Individual
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Can’t accept because it is prohibited by the definition of
Private Company.
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5.)
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Proprietorship Firm ;
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Can’t accept because it is prohibited by the definition of
Private Company
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6.)
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HUF
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Can’t accept because it is prohibited by the definition of
Private Company
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7.)
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Partnership Firm
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Can’t accept because it is prohibited by the definition of
Private Company
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8.)
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Any Company
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Yes, can accept, but also comply with Sec 1863 wherein
the conditions are specified for the lender
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9.)
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Banks
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Yes, can accept
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10.)
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Any other Financial Institution which are not incorporated as
Banks ( eg. Religare, Fullerton, Barclays, Bajaj Finance)
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Yes, can accept
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11.)
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Trust
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Yes, can accept, but loan received should be non- interest
bearing.
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12.)
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Outside India
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Yes, can accept, but subject to the provisions of the Foreign
Exchange Management Act, 1999 and rules and regulations made thereunder.
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13.)
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Govt.organisation ( eg. SIDBI)
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Yes, can accept
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Other points :
For accepting the Loans/Deposits from above parties, a company has
to follow the conditions laid down under Sec 180(1)(c) which is
If Proposed +Existing
borrowings (exclude temporary borrowings) > (paid up capital +Free
Reserves), the Company shall have to pass Special Resolution in General
Meeting.
2. Deposit Rules: for acceptance of deposits from shareholders and relative of
directors:
Company can accept maximum 25% of (paid up
capital + Free reserves) – This limit is for existing and proposed deposits.
Company has to follow the procedure like issuance of circular,
depositing insurance, credit rating, appointment of trustee etc.
But
after Notification G.S.R. 464(E) dated 05/06/15, the company can
accept 100% of (Paid up capital+ Free Reserves) without fulfilling
the conditions mentioned in sec 73(2) clause (a) to (e) i.e. issuance of
circular, depositing insurance, credit rating, appointment of trustee
etc.
3. Sec 186: A Company (Private or Public)
can’t give loan to any other person or body corporate which is more than
60% of its Paid up Capital + Free Reserves + Security Premium
Or
100% of Free Reserve + Security Premium
If
this limit is exceeded, prior approval by special resolution in general meeting
is required. However, in case a loan or guarantee is given by a company to its
wholly owned subsidiary company or a joint venture company than
special resolution is not required.
