Can Private Company take loans from shareholders?


Can Private Company take loans from shareholders?



This is one of the most common questions which is asked by the promoter of the closely held companies. Even the auditor has the same query as non-compliance & non reporting therefore attracts the penal consequences.

First of all, it may be noted that the company can take loan from the shareholders, subject to fulfilling the compliance under deposits, and filing form DPT-3 every year before 30th June.

Reasons for reporting is that loans from the shareholders will be treated as deposits hence the reporting is mandatory.

Further Private companies take loans from its directors, directors, relatives, shareholders, Companies, Banks and other financial institutions.

It may be noted that while availing loans from the shareholders, the private company is not required to pass any circulation, or not required to obtain any credit rating.

MCA issue Exemption notification for Private Limited Companies on 13th June, 2017 states that: ‘Chapter V, clauses (a) to (e) of sub-section (2) of section 73, Shall not apply to a private company which fulfils all of the following conditions:

1.     Company which is not an associate or a subsidiary company of any other company

2.     If the borrowings of such a company from banks or financial institutions or anybody corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower;

3.     Such a company has no default in repayment of such borrowings subsisting at the time of accepting deposits under this ”