CS Divesh Goyal

As per Rule 2 sub rule 1 clause vii of the Companies (Acceptance of Deposits) Rules, 2014

“Any amount received from a person who, at the time of receipt of the amount, was director of the Company, will be out of preview of Deposits”.

Condition: The 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. 

S. No. QUESTION & ANSWERS
A.     If a company accepting Loan from directors then Which sections will be Attract?
  ·         Section 179(3)·         Section 180(1)(c)·         Rule 2(1)(vii) of Chapter V
B.      Is there any form required to be file while accepting loan from director?
  Form MGT-14 required to be file for Loan from Director.
C.     When Board resolution required passing for acceptance of Loan from Director?
  If loan accepting from director along with borrowing already made by Company is within the limit of “Paid up share capital + Free Reserve” then Board Resolution required to be filed u/s 179(3) and form MGT-14 required to be filed with ROC.
D.     When Special resolution required to be passing for acceptance of Loan from Director?
  If loan accepting from director along with borrowing already made by Company is exceeds the limit of “Paid up share capital + Free Reserve” then Special Resolution required to be filed u/s 180(1)(c) and form MGT-14 required to be filed with ROC.
E.      Is resolution required to file every time when company will borrow money from the director?
  No, there is no need every time to pass resolution for acceptance of money from director.Company can pass a resolution with higher limit at a time whether in·  Board Meeting – if higher limit doesn’t exceed “paid up share capital + free reserve:

·  General Meeting- if higher limit exceed “paid up share capital + free reserve:

F.      If Company exceeding the Limit of “Paid up share capital + Free Reserves” then process to accept loan from Director
  Step-I- Company will Hold a Board Meeting to call General Meeting.Step-II- Company will pass a Special Resolution for Higher limit.Step- III- Company will file MGT-14 for Special Resolution passed in General Meeting.

Step-IV- Company will hold Board Meeting and Board of Directors will pass resolution for acceptance of loan from Director.

Step-V- Company will file MGT-14 for Board Resolution.

G.     If deposit in the joint name of director and other person then how it will be treated?
  A deposit in joint names of director and another person, who may or may not be director, should be permissible, if name of director is first depositor, though there is no specific provision.
AMOUNT FROM DIRECTORS:Any amount received from a person who was director of the company at the time of receipt of the amount is not ‘deposit’.Condition: The director should declare in writing that the money he is depositing is not borrowed or accepting loans or deposits from others.

(Author – CS Divesh Goyal, ACS is a Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)

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16 responses to “Loan From Director under Section 179(3) and 180”

  1. ravi says:

    One query…
    If a private company take a loan from a banking institution but the property which is mortgaged is of director.. Then whether it is correct to directly show the loan in company’s books or it should teated loan form director??

  2. ANSHUMAN JAIN says:

    What if the director is also a shareholder of the company?

  3. Shrikant Sariyot says:

    Dear Sir,
    If
    “Company receive loan from Director, who have borrowed the same from other person who is not director and not have any interest in company”
    will it be treated as Deposit or not ?,

  4. Rahul saraf says:

    Whats the logic behind this section?

  5. Niketa Kumari says:

    Sir,
    Whether Loan from Directors required to file Form MGT-14 even if the limit does not exceed paid up share capital and free reserves, or it has been omitted?

  6. Ranjit Mondal says:

    Under which section Loan from relative of directors is covered? Also what is the procedure? Which resolution to be passed? Plz guide

  7. Chanchal Verma says:

    can anyone provide resolution for loan from shareholder exceeding the limit?

  8. Jainendra garg says:

    Can you please provide the draft format for the declaration also loan from director relative

  9. Harsh Punmiya says:

    Dear Divesh,
    If a company’s director has given loan to the company om 1/11/2015 (let’s say).
    Within which date does the company has to file MGT-14? Please do let me know
    Thanks in advance.

    Regards
    Harsh Punmiya. A

  10. Gargi Vyas says:

    is it true that the company is not required to pass special resolutions for the businesses mentioned under Section 180 of the Companies Act, 2013 by exemption notification dated 05.06.2015???

  11. Ankit Ahuja says:

    Dear Sir

    Can you please provide the Draft copy of special resolution as loan amount exceeded the sum of paid up capital and free reserves.

  12. CS NARASIMHULU says:

    Dear Mr Divesh

    Please also guide us if loan taken by the Company from a Director resigned the directorship subsequently will the loan taken by the Company still continue under exempted category since under rule 2(1)(viii) the following words have been used ‘at the time of the receipt of amount, was a director’. Regards. CSN

  13. Md. Tanveer Alam says:

    Can you please provide the draft format for the declaration also?

  14. Md. Tanveer Alam says:

    Dear Mr. Divesh,

    I think company is also required to take a declaration under Rule 2 (viii) of Companies (Acceptance of Deposits) Rules, 2014, from the director, whenever company is taking loan from the director, declaring that the amount is not being given out of borrowed funds or accepting loans or deposits from others.

    Please correct me if I am wrong.

  15. Raj says:

    Hello Sir,

    Please also guide us if loan is taken by the Company from the Director who is also a shareholder of the Company. Loans taken from Director doesn’t come under Deposit provisions but loan taken from shareholders attract Deposit provisions.

    Regards
    Raj

  16. CA Ashish Goel says:

    Dear Mr. Divesh,
    Plz Let me know the computation of (Paid up capital + Free Reserves) when company is in its first year of operation and accepting loan from director.

    Say Company Paid up capital-1 Lakh
    Loan From Director- 40 Lakh

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