With the Amendment of the act, the New Companies Act, 2013 has removed the shareholders, and the relatives of the directors are removed from such borrowings.
The Companies (Acceptance of Deposits) Second Amendment Rule, 2015 came as a savior for all the private companies by including the relatives of the directors under the exemption list off deposits in clause (8) of Rule 2(c) of deposits rules. The amount which is received from the relatives of the directors who satisfy the condition which is given below is exempted from the deposits:
At the time of receiving the amount by the company at that time, the lender should be the relative of the director.
Relative should give the declaration in written form that loan is provided using his/her own funds
The company should disclose the details of the money accepted in the board’s report.
“Chapter 5 Clause (a) to (e) of sub- section 2 of section 73 shall not apply to private companies which accept from its member’s monies not exceeding one hundred percent, of an aggregate of paid-up share capital and free reserves and such company shall file the detail of monies so accept to the registrar in such manner specified (i.e., form DPT-3).”
Ministry of Corporate Affairs issued exemptions notification for private limited companies on 13th June,2017 states that: “Chapter 5/Clause(a)to(e) of sub -section 2 of section 73 shall not apply to private companies which fulfill the following conditions namely :
i) Which is not an associate or a subsidiary company of any other company
ii) If the borrowing such company from banks or financial institutions or any body corporate is less than twice of its paid-up share capital or 50 crores rupees whichever is lower
iii) Such company has not defaulted in repayment of such borrowings subsisting at the accepting deposits under this section.”
a) If Director is not a shareholder: If the directors are not the shareholder then the amount which is received from the directors will be treated as deposits.
According to section 76 read with Companies (Acceptance Of Deposits) Rule 14, Public Company will accept these deposits either having:
i) The net worth of rupees 100 crores, or
ii) Turnover of rupees 500 crores
According to this section, require Public Company to obtain a credit rating every year and to create a charge on the assets in favor of deposits holders for the amount not less than the amount of deposit accepted.
b) Director is a shareholder: If the directors are the shareholders then the company will treat such amount as a deposits from the members. Provision of Section 73(2) read with Companies (Acceptance Of Deposits) Rule 14 will apply.
The amount which is received from the directors owns funds are treated as loans and do not require any compliance with section 73(2) or section 76. The directors will give a declaration to the company that the amount is their own fund, not any borrowing or loans. The declaration will be given under the director’s report as well as the notes of accounts of the financial statement of the company.
The company will hold a board meeting and will pass the special resolution for accepting loans from the directors. In that, they will approve the limit up to which they can accept the loans.
Before accepting a loan they will sign the declaration that the amount is not from any borrowings of the directors.
The company will take the loans after signing the terms and conditions with the directors.
The loan to the company can be with or without interest.
If the loan is converted into equity share after the expire of the loan period. Then such conditions or arrangements must be present in board resolution.
Loan agreement and resolution shall be filed with the registrar of the company within 30 days in e-form MGT-14, from the date of passing such resolution.
The interest rate on loans can be in the range of 5% to 36%. Even the interest can completely depend on the mutual agreement between the directors and the company.
If the company fails to pay back the return loan amount to the director the penal rate of interest of 18 % will apply on the company.
1. The company in addition to the payment of the amount of deposit or part and the interest due will be punishable with a fine which shall not be less than one crore rupees But which may extend to 10 crore rupees
2. Every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with a fine which shall not be less than 25 lakh rupees
But which may extend to 2 crores rupees or with both
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