Loan from director’s relative: Easy funding for Private Limited Companies

 

The much awaited relief to Private Limited Companies announced by Ministry of Corporate Affairs. Bonanza for private Limited company!!! After the boom of accepting loan from Directors, now, Ministry of Corporate Affairs has provided that private limited companies can accept unsecured loans from a relative of Director. Loan from director’s relative: Easy funding for Private Limited Companies.

 

Ministry of corporate affairs (MCA) vide its notification dated 15.09.2015 has provided that with effect from 15.09.2015 a private company can  accept unsecured loans apart from director also from a relative of Director.

 

Major highlights to be noted:

• Applicable to private limited companies
• A private limited can accept any amount from relative of director
• Relative of director from whom money is received, furnishes to the company at the time of giving the money, a declaration in writing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others
• The company shall disclose the details of money so accepted in the Board’s report.
• In simple words, these funds should NOT be from loans or borrowed funds. These funds should be from OWN SOURCES.
• The relative need not be a shareholder of the company.

With this amendment, now, private limited companies have wider scope for arrangement of funds for them. Not only this, the compliances to be made also reduced substantially. Now, accepting loan from directors, relatives or shareholder shall not be considered as ‘Deposits’. This simply means easy way of funding and ease of doing business for private limited companies.

 

A Major relief to private limited companies has been given by MCA regarding acceptance of deposits by private limited company.

 

As a result, A PRIVATE COMPANY CAN ACCEPT LOAN FROM:

• Directors;
• Relatives and
• Members of the company

 

This Recent Amendments has bought the Companies Act, 2013 almost at par with Companies Act, 1956 in respect to accepting of money from Director, Relative and Members of the company subject to Certain Conditions as prescribed.

Loan from director’s relative: Easy funding for Private Limited Companies !!!

For Reference, (Amendment) – In rule 2, in sub-rule (1), in clause (c), for sub-clause (viii), the following shall be substituted, namely:-

 

(viii) Any amount received from a Person who, at the time of the receipt of the amount, was a director of the company or a relative of the director of the Private Company:

 

Provided that the director of the company or relative of the director of the private company, as the case may be, from whom money is received, furnishes to the company at the time of giving money, a declaration in writhing to the effect that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others and the company shall disclose the details of money so accepted in the Board’s report.

Download the notification

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