Private Company Loan Rules
| S.No. | Entity or Person | Loan Acceptance |
|---|---|---|
| 1 | Director | It is allowed - Provided a declaration is given by the director that the sum has not been given out of funds acquired through him by borrowing or accepting loans or deposits from others |
| 2 | Relative of Director | It is not allowed - As Ministry of Corporate Affairs through its notification dated 15.09.2015 has furnished that a private company could accept unsecured loans apart from director also from a relative of Director providing the relative of director from whom money is received, provides to the corporation at the time of giving the money, a declaration in writing towards the effect that the sum is not being given out of funds acquired through him by borrowing or accepting loans or deposits from others as well as the corporation shall disclose the details of money so accepted in the Board's report. The relative may not be a shareholder of the corporation. |
| 3 | Shareholders | Where money accepted from members go beyond 100% of the Paid-up share capital and free reserves: It is not allowed. Where sum accepted from members doesn't go beyond 100% of the Paid-up share capital and free reserves: It is allowed subject to: Passing a member's resolution by making provision for security, relating to any for due repayment of the sum of deposit accepted and interest thereon (not below 12.5% at present) which includes the creation of charge (Form CHG1) on the property or assets of the Corporation. Filing the details of the money accepted with the registrar. |
| 4 | Relative of Shareholders | It is not allowed. |
| 5 | An individual who is Director and Shareholder Both | It is allowed. provided a declaration is given by the director that the sum has not been given out of funds acquired through him by borrowing or accepting loans or deposits from others. |
| 6 | Employee | It is allowed - The sum borrowed should not exceed the employees' annual salary in the nature of interest-free security deposit. |
Can company take loan from Individuals?
A person shall be deemed to be a relative of another, if, and only if: (a) they are members of a Hindu undivided family; or (b) they are husband and wife; or (c) the one is related to the other in the manner as:
- Father
- Mother (including step-mother)
- Son (including stepson)
- Son's Wife
- Daughter (including step-daughter)
- Daughter's son's wife
- Father's father
- Father's mother
- Mother's mother
- Mother's father
- Daughter's son
- Daughter's daughter
- Son's son
- Son's son's wife
- Son's daughter
- Son's daughter's husband
- Daughter's husband
- Daughter's daughter's husband
- Brother (including step-brother)
- Brother's wife
- Sister (including step-sister)
- Sister's husband
Can Private company take loan from Any Another Private Limited Company? YES, It is Allow.
Condition for Loan Given: with effect from 5th June 2015 (private company exemption notification) it can give loan to another private company.
Subject to Limitation: 60% of Paid up Capital + Free Reserve + Security Premium; 100% of Free Reserve + Security Premium
Can Private company take loan from Any Banking Company? Yes, It is Allow.
Can Private Company take loan from Any Firm? No, Not Allowed.
Company can't accept loan from a Partnership firm even if its partners are member/director of the Company. Because Company can accept loan only from person except Director/Member or Relative of the Director
Tax laws and thresholds change frequently. This article reflects the rules in force when it was written - please confirm current provisions before relying on it, or get in touch for up-to-date advice.