Unsecured Loans form Relative of Director

[Pranay Patel]

Dear All,

A Private Limited company has accepted unsecured loan from relative of one of its director during the f.y. 2013-14. Since now as per CA, 2013 it is not possible, so what actions are required to be taken to dispose this loan, apart from repaying this loan.

1. Can we show it as share application money, if yes then how allotment is possible in current year.

2. Can we convert this unsecured loan into equity by allotment of equity shares.

Please share your views.

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Best Regards

Pranay Patel

 

[Rajeshwari T R]

Repay the money or show it as share application money and allot the shares.

File dpt-4 because it will be treated as deposits.

Sent via Micromax

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[Pranay Patel]

If we show it as share application money, then how is it possible to allot shares as per section 42 (private placement), considering the allotment to be made on current date.

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Best Regards

Pranay Patel

Company Secretary

+91 7869020174 

[Bhakti Patel]

you do not have to do anything of that particular amount, as it is not deposit :

Two things you must understand:

1) Deposits before 01/04/2014 are required to be repaid. But the unsecured loan taken from director relative before 01/04/2014 is not deposit as per CA 1956. so you can keep it as it, no need to do anything, as it will be treated as per CA 1956.

2) from 01/04/2014, the deposit definition as per new rules apply, not for the amount already taken before such date.

Regards,

Bhakti

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Thanks & Regards

CS Bhakti Talikot

M/s Bhakti Talikot & Associates

PH. 9822594632
off. (0253) 2350607
Office: C/o Patel PAcking Products, D-41,
             Behind Sham Sundar Hotel,
             MIDC, Satpur, Nashik-422007

 

[Rajeshwari T R]

Dear sir,

As per 2013, it will be treated as deposits and need to be filed dpt-4.

It has to be repaid within 1 year from the commencement of the act as per section 74.

Sent via Micromax

<div cla

[VANDANA PERIWAL]

Bhakti,

 

All such amounts which were not considered as deposits under old act but are under definition of deposits under new act shall be reported to ROC in form DPT-4 till 31st August and shall be repaid within 1 year.

Refer sec 74

[santhosh kumar]

Ms. Bhakti

Iam sorry ur views r not appropriate .

As  per new act. Dpt4 needs to be filed. 

Those fall under deposits as per new act

others views are welcomed

Santhosh 

--

CS.M.Santhoshkumar
"From the man who always has a Good heart ! "

ॐ सर्वे भवन्तु सुखिनः

 

 

[Bhakti Patel]

Dear sir,

I have been gone through the provisions of sec 74, and it is interpreted that the amount taken before 01/04/2014 which is not falling under the Companies act 1956 as deposit, is not required to be repaid.

How it is feasible for the small companies to repay such large amounts which are falling under the purview of Companies Act 1956 not as deposit. It is not practicable and kindly interpret the sec 74 and more views are welcomed.

 

Before 01/04/2014, the deposit definition as per companies act 2013 is not applicable and therefore the deposit to be repaid within 1 year is only for the deposit under CA 1956, whereby you can follow new rules and maintain those deposits or unless repay them.

Regards,

Bhakti

[Ganapati Ghatti]

 Yes.

Interesting interpretation by Ms. Bhakti

Sec 74 says ''any deposit accepted by the company before the commencement of this Act'

Before commencement of this act, the Company has not taken the amount as deposit. 

Welcome for others' views.

Ganapati Ghatti

Mobile: +91-8970797164

[Ganapati Ghatti]

Also please suggest your views for this case:

'the company has taken huge loans from the relatives of the Directors. The company's position is not good enough to repay the loan amount. Can it go for private placement of shares for clearing the loan amount.?"

Thank you All.

[Rakesh]

I agree the Interpretation given by Ms Bhakti... as Rule 19 of Deposits explains clearly Sections 73 and 74 are eligible to companies who has accepted Deposits or invited public deposits under the relevant provisions of the Companies Act 1956 and Rule made under that act.

Others views are needed on this...

[Prashant Damani]

Dear All,

One point is also worth mentioning here.

Clear reading of Section 73(2) says that " A company may, subject..........accept deposits from its members on........"

Does this means that a Company (if it is not an eligible company u/s 76) can accept deposit only from its members / shareholders and not from any other individual?

Please help.

Thanks in advance.

PRASHANT DAMANI

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[VANDANA PERIWAL]

Yes Mr. Damani.

 

 

Thanks and Regards
CS Vandana Periwal

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[Ganapati Ghatti]

I've got a simple solution for this.

Instead of allotting shares..etc, we can appoint the unsecured creditors (relatives of directors) as the Directors of the Company. (this can be done only if the management agrees for the same)

Please suggest your views on this. 

Thank you

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[Ankush Lawate]

Person should be director at the time of receiving unsecured loan.

[VANDANA PERIWAL]

ankush is right mr. ghatti

 

Thanks and Regards
CS Vandana Periwal

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[Ganapati Ghatti]

Yes Ma'm, 

I agree. If we make back dated appointment.?

Sorry if this seems to be the excess use of loopholes.

[VANDANA PERIWAL]

exactly.. it is just over usage of loopholes.

 

but yes it could be done.. beware of late filing fees...

Thanks and Regards
CS Vandana Periwal

[Ganapati Ghatti]

If the company can not repay crores together, it will have to bear that late filing fees at least.

Thank you 

[Chirag Bagadia]

Jj

Just add :-

Read Preamble to new deposit rules introduced with effect from 1^st April 2014 –

it says “In exercise of the powers conferred by clause (31) of section 2, section 73 and section 76 read with sub-sections (1) and (2) of section 469 of the Companies Act, 2013 (18 of 2013), and in supersession of the Companies (Acceptance of Deposits) Rules, 1975 or any other rules prescribed under the Companies Act, 1956 (1 of 1956) on matters covered under these rules except as respects things done or omitted to be done before such supersession, the Central Government, in consultation with the Reserve Bank of India, hereby makes the following rules, namely

Definition of deposits is elaborated in these rules and the definition is effective only from 1^stApril 2014 only

Hence, i also fees that the amount received by the company under the Companies Act, 1956 which was not a deposit under the said act will not be covered under Section 74 of the Companies Act, 2013

Regards

Chirag Bagadia

CS & Legal

Radio City 91.1FM

Thanks and Regards
Chirag Bagadia
ACS, LLB, Mcom

[Indrani Sanka]

Hi,

the best option would be to convert the unsecured loans into equity shares by way of allotment...... safe and permitted under the act

On Sat, Aug 9, 2014 at 3:41 PM, Pranay Patel <28pr...@gmail.com> wrote:

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Regards,

Indrani

[Mohit Mahana]

If we convert the relative to Director,  then those Directors have to declare that the money given is not the borrowed one.

Regards,

CS Mohit Mahana

[mgra...@gmail.com]

Q-1. Can we show it as share application money, if yes then how allotment is possible in current year.

yes. If you can take application for allotment of share dated prior to 31-3-2014, you can show the same as share application money. There is nothing in the Act to prohibit such a move. Ensure a resolution in the minutes is recorded to show that application for shares has been received and that the allotment u/s 72 of 1956 would be made within 60 days 

2. Can we convert this unsecured loan into equity by allotment of equity shares.

Yes. Pass resolution to Allot shares prior to 31-5-2014 referring the earlier resolution passed on 31-3-2014 to avoid PAS-4 hassles. Your resolutions should establish that  Allotment took place with in 60 days of receipt of share application money which is in line with the provisions of the current Companies Act.  Next question would be  issue of share certificate:- Pass next resolution before 31-7-2014 to comply with sec 56(4) to issue certificate within 60 days. Finaly, you are left with one problem of stamping the instrument. Deal this issue under the State Stamp Act. It is each.

you would end up paying additional fee on PAS-3 but you will be complying with legal requirements adequately.

 

Regards

Gopalrathnam

On Saturday, August 9, 2014 3:42:05 PM UTC+5:30, Pranay Patel wrote: