A private limited company is the most accepted and popular business structure in India and is governed by the provisions of the Companies Act and rules made thereunder, to carry out business operations loan from director to company is the main source of debt funding private limited access.
In every type of business structure there are two main sources of funds that an organisation deals with, one is in the form of capital and other is in the form of loan or debt.
In case of a company accepting funds from the capital it has to issue shares, and if the company is accepting funds from loan there should be an agreement with respect to the terms and conditions assigned to the particular loan and the security provided for a given loan.
In this article we will discuss accepting loans from the directors of the company by a private limited company.
Please note that accepting any type of loans or money from any person in a private limited company falls under the provisions of companies acceptance of deposit rules 2014
“deposit” includes any receipt of money by way of deposit or loan or in any other form, by a company, but does not include –
“(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 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 and the company shall disclose the details of money so accepted in the Board’s report;”
The company is required to hold the board meeting and pass necessary resolution in this regard for approving the limit of loan up to which company can accept the loans.
Compliance with Respect to Loan : If the Loan Agreement or Terms of Loan Contains clause relating to the conversion of this loan into equity then the company is required to file form mgt 14 within 30 days from the date of such agreement
As this loan is exempted from the deposit, the company is required to file Form DPT -3 with the amount of loan accepted from Directors of the Company under the column, Items Not considered as Deposits
CIN: U74999RJ2018PTC060472
GSTIN: 08AADCF3300N1ZQ
Startup Recognition: DIPP11910
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Fastlegal: Business Registration and Compliance Service Provider for Indian businesses
Since 2015, Fastlegal has been a one-stop solution for business founders or entrepreneurs looking for professional services i.e., Business Registration, Trademark or Copyright Registration, Tax Filing, Accounting & other Compliances with respect to Taxation and Corporate laws of India. We areusing technologyto ensure startups are fully compliant with India`s legal system. In 2018, we launched NidhiExpert & MicrofinanceCloud, loan and deposit management software, for Nidhi &Non-Banking Finance Companies respectively.
Registration of a Business Entity
Our team of professionals help founders or entrepreneurs to choose the best suitable business entity according to their business activity or expansion plans from a private limited company, limited company, partnership firm, limited liability partnership, or proprietorship firm. While advising on the entity type professionals explains about advantages and disadvantages of each entity. You can reachFastlegal for all the consultancy you need. We assure you of great service at a reasonable price.
Intellectual Property
Most of the startups neglect intellectual property which is one of the most valuable assets for a business, as intellectual property i.e., trademarks, copyright and patents enables you having sole rights to your creation, be it your design, invention or invention. At Fastlegal, we have a dedicated team of competent professionals to handle all your Intellectual Property requirements. We will help you in getting copyright registration for all your audio and video content, pictures and softwares or websites, filing your trademark application within two days.
Government Registrations
Started a trading business? You need to register under GST law and also require a Trade License. Started a food business, you need an FSSAI license. Have hired employees for your business? You need a Shops & Establishments Act Registration, Provident Fund Registration & ESIC Registration .And that`s not enough, you also need to file PF & ESIC Returns.
RBI Compliances
If you want to issue shares to persons residing outside India, wants to raise funds in form of loan from a foreign entity/person, your company have foreign shareholders or promoters you need to comply with FEMA Laws by filing returns and getting approval from Reserve Bank of India. We at Fastlegal can help you in making compliances with FEMA laws and filing periodical and event based return with Reserve Bank of India or any other competent authority.
Mandatory Compliances or Filings
Once you register a private limited company, limited company or an LLP you need to report Ministry of Corporate Affairs and Income Tax Authorities about relevant changes you make, be it appointment of a director, resignation of a director, change of registered office, change of company or LLP name & removing or adding a partner. In case of private limited company or an LLP (audit is applicable beyond certain turnover limit in LLP) you need to maintain proper accounts and get them audited. You also need to file Annual Returns for private limited company or LLP. At Fastlegal, we provide all these services completelyonline, you can hire a Chartered Accountant, Company Secretary or Lawyer for the year on retainership basis and our team of professionals will ensure that all legal filings are completed on due time and you can focus on your business only without worrying about legal filings.
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