The scenario of acceptance of loans/ deposits has changed a lot after implementation of the Companies Act, 2013. Regarding loan accepted by a Public Company, in brief, 3 categories of loans have been prescribed under Companies Act, 2013.
1. Loans which can be accepted ex. Loan from Directors, Loan from any other company, banking institutions, Central Govt. etc.
2. Loans which can be accepted subject to complying with Deposit Rules, The Deposit Rules are very complicated, demand a lot of compliance and practically difficult to be followed. If these rules are followed, Company can take loans from members, etc.
3. Loans which cannot be accepted: ex. Ineligible Public company cannot accept deposits from Public.
For your easy understanding, we state below the provision of new Act regarding acceptance of the Loan:
Member: Yes, can accept, but subject to the condition specified in Deposit Rules2.
Promoters & Their Relative: Yes, can accept if it is in stipulation of the requirement of any lending Financial Institution (FI) or Bank. This Exemption is available till the loan is not repaid.Yes, can accept, but director will give a Declaration in writing that money is not given out of borrowed funds.
Yes, can accept up to the employee’s annual salary in the nature of non- interest bearing security deposit. There should be a contract of employment with the company
Yes, can accept, subject to the provisions of Foreign Exchange Management Act, 1999 and rules and regulations made thereunder.
Can’t be accepted by ineligible company but an eligible company can accept subject to the condition specified in Deposit Rules2.
|Loan from:||Provision in Companies Act, 2013|
|4||any other Individual||Can’t be accepted by ineligible company but an eligible company can accept subject to the condition specified in Deposit Rules2.|
|5||Proprietorship Firm||Can’t be accepted by ineligible company but an eligible company can accept subject to the condition specified in Deposit Rules2.|
|8||Any Company||Yes, Can accept but also comply with Sec 1863 , wherein the conditions are specified for lender|
|9||Banks||Yes, can accept|
|10||Any other Financial Institution which are not incorporated as Banks ( Religare, Fullerton etc.)||Yes, can accept|
|11||Trust||Yes, can accept, but the amount received should be non- interest bearing|
|13||Govt.organisation ( eg. SIDBI)||Yes, can accept|
Eligible Company means a public company which has net worth of Rs.100 Cr or turnover of Rs.500 Cr. Ineligible company are the other public companies.
- For Accepting the Loans/Deposits from above parties, a company has to follow the conditions laid down under Sec 180(1)(c) which is
If Proposed + Existing borrowings (exclude temporary borrowings) > (paid up capital +Free Reserves + Securities Premium account), the Company shall have to pass Special Resolution in General Meeting.
- Deposit Rules: Rule for acceptance of deposits by a company:
- A company can accept a maximum 35% of (paid up capital + Free reserves+ Securities Premium account).This limit is for existing and proposed deposits.
- In case of eligible company:
a) Limit will be 10% instead of 35% for deposit from members, This limit is for existing and proposed deposits from members.
b) Limit will be 25% instead of 35% for other deposits, This limit is for existing and proposed other deposits except deposit from members.
c) Every eligible company shall obtain, at least once in a year, credit rating for deposits accepted by it and a copy of the rating shall be sent to the Registrar of Companies along with the return of deposits in Form DPT-3.
- Follow the procedure like issuance of circular, filing copy of circular with Registrar, deposit repayment reserve account , credit rating, security for deposits, certificate from auditor for no default in repayment of deposits,etc.
- Sec 186: A Company (Private or Public) can’t give loan to any other person or body corporate more than
- 60% of its Paid up Capital + Free Reserve + Security Premium
100% of Free Reserve + Security Premium
If this limit is exceeded, prior approval by special resolution in general meeting is required.
If you wish to connect with us, please fill the query form below or else you can also mail your queries at firstname.lastname@example.org. We would be happy to help.