Loan from Directors

[Pranay Patel]

Dear Members,

What compliance needs to be done as per Companies Act, 2013 while receiving unsecured loans from Directors in case of private limited company.

Also, let me know if any documents need be prepared for record purpose only, as a good corporate practice.

Thanks. 

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Best Regards

Pranay Patel

 

 

[Ganga Anil Kumar]

Dear Friend,

This becomes Related Party Transaction. The interest must be near to Bank rate, must be reasonable.

Get approval from Board / Members. Enter into contract, make an entry in Related Parties Register MBP-4.

Thanking you,

Warm Regards

CS Anil Kumar Ganga | Chennai | India | +91 87545 95549 (TN) | +91 80082 99901 (AP)

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[Kallki Sree]

Dear Friend,

We shall get loan from Director and even without paying interest shall retain,  but not more than bank's deposits rate, if any paid.

Have to get a declaration from the Director that this fund is not a borrowed fund.

Best,

Kallki

[Leena Aggarwal]

Dear Pranay,

You have to pass BR u/s 179 (3)(d), SR u/s 180(1)(c) and file MGT 14 with ROC. This will not get covered u/s 188 (related party transaction) as loan is not covered under Section 188(1).

[Pranay Patel]

Dear Anil ji, Even i think it shall not cover under 188 for related party transaction.

Dear Kalki, ya i have taken declaration from director that fund provided is not borrowed fund.

Dear Leena, i support your views, but i doubt why to pass special resolution when aggregate of borrowed fund is within the total paid paid up share capital and free reserves.

 

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Best Regards

Pranay Patel

 

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[Leena Aggarwal]

Dear Pranay,

You asked for the sections not its applicability. You have to check the limits. If SR is required, pass it else BR is enough.

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Regards

 

ACS Leena Aggarwal

Company Secretary

9810359968

[Pranay Patel]

Dear Leena,

In my case, a private company has accepted unsecured loans from directors in the month of April, 2014, June, July, August and so on.

So what should i do to comply with the provisions of Companies Act, 2013.

Company has passed the Special Resolution in the AGM held on 30.09.2014, to borrow money over and above the agrregate of Paid up capital and free reserves.

Should i pass a Board Resolution under section 179(3)(d) in the month of April for accepting unsecured loans from directors in tranches and file the same with ROC backdated or can i pass and file the same in current date.

Pls suggest. 

[CS Simranjeet Singh]

position is not clear as to section 179(3)(d):- whether it covers unsecured loan from directors or not especially in Pvt Co's.. i believe obtaining declaration from director as per deposit rules is sufficient.. no need to pass board resolution u/s 179(3)(d) and to file MGT-14 for this.. i request senior learned members to throw some light on this..

 

 

Regards,

Simranjeet Singh

Associate Company Secretary

"To know, is to know that you know nothing. that is the meaning of true knowledge."

 

   

[Leena Aggarwal]

Pranay,

I am facing the same problem and i have put my query too. Waiting for members reply.

Personally i feel, for such kind of transactions we should pass a BR stating maximum limit upto which Co. can borrow from Directors. Since this resolution is required to be filed with ROC, we have to pass again and again whenever the company borrow and it would be very costly for the company.

Members pls suggest.

[Pranay Patel]

Yes exactly, it will be very costly to file the same again and again.

We may pass a resolution like this (i found it somewhere over internet);

RESOLVED THAT pursuant to Section 179(3)(d) and other applicable provisions, if any, of the Companies Act, 2013 or subject to such modification and re-enactment thereof, consent of the Board of directors of the Company  be and is hereby accorded for obtaining unsecured loan not exceeding Rs._________(Amount in words) from (Name of the Director), Rs. _________ (Amount in words) from (Name of the Director)  in one or more tranches, and on such other terms and conditions as may be mutually agreed between the both parties".

But one more point which is to be kept in mind is, if at any time company wants to convert these unsecured loans to equity shares, then compliance of Section 62(3) is to be made while drafting this resolution.

If any one dealt with this situation pls give their valuable suggestions.

[Leena Aggarwal]

Thanks Dear. 62 is not a concern for me as we take and pay back to directors.

Let me check 62.

[CS Simranjeet Singh]

thanks Manoj Sir.. can u pls tell can we  pass a general blanket resolution for borrowing from various parties like banks, financial institutions, other parties u/s 179(3)(d) upto a limit as approved by the members u/s 180(1)(c).. this will save cost of MGT-14 filing.. but if seperate board resolutions are passed for borrowing whenever done then MGT-14 needs to be filed everytime.. is it right ? and one more thing which borrowings and from whom are covered in Section 179(3)(d)... if possible can u brief it out..

 

 

Regards,

Simranjeet Singh

Associate Company Secretary

"To know, is to know that you know nothing. that is the meaning of true knowledge."

 

   

On Thu, Dec 18, 2014 at 3:16 PM, Manoj Singh Bisht <csmano...@gmail.com> wrote:

Hold on.

The Company should first obtain the declaration from Director at the time of taking loan as per deposit rules.

Further, Borrowing from a director or a third party does not make a difference as far as compliance with Section 180(1)(c), 179(3)(d) is concerned.

Whether you need to pass a Board Resolution or a Special Resolution depends on whether the loan is exceeding the limits stipulated under section 180(1)(c) of the Act.

Before considering conversion of loan into equity, pl. refer section 269T of the incometax act !!!!

ROC Form - MGT - 14 for both resolutions - Special Resolution of shareholders (if applicable as per Sec 180(1)(c)) + Board Resolution for borrowing under section 179(3)(d).

All the best.

Best Regards

Manoj

[Manoj]

Yes, Board/ shareholders can set a limit upto which company can borrow.

Board has delegation power also.

Sent from my iPhone

[Leena Aggarwal]

 A Pvt. Co has passed BR u/s 292(1)(c) in April, 2013 specifying the limits upto which it can borrow money from directors/ body corp. Is it mandatory for this company to pass BR u/s 179(1)(d) after commencement of CA, 2013 even when the borrowing is less than the limits.

We have seen the same situation under section 180 which was cleared by MCA. Can we apply that logic here too.