Unsecured loan

[Neena Deshpande]

Dear Members,

 

Can a private limited company accept unsecured loan from a HUF of relative of Director? The relative is not holding shares in the Company. Will it amount to violation of Sec. 3(1)(iii)?

 

Thanks in advance

 

Neena

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Neena Deshpande & Co.
Company Secretaries
76A / 23 Vrindavan Society, Thane (W)
Contact # 92233 93811
67936407 / 25422236

[R V SECKAR]

Hello,

Any unsecured loan from the HUF will be considered to be against the provision section 3 [i] [iii] of the companies Act .

There is no restriction  for a private limited company to receive unsecured loan from a shareholder or a director and receives interest from the company for the unsecured loans advanced as long as if interest rates are equivalent or lesser than market rates.

 

It is better to receive funds from shareholders or directors as unsecured loans rather than deposits  Since , there is a prohibition for the private limited company to accept deposits from public under section 3 of the Companies Act, 1956 . As per section 3 [i] [iii] of the companies Act , a private company is allowed to accept deposits from its members ,directors or from their relatives.

R.V.Seckar

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