Restrictions and Authorisation of Private Limited Companies which is registered under Companies Act, 2013 or any other Previous Act.

 

"The road to success and the road to failure are almost exactly the same."

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Restrictions and Authorisation of Private Limited Companies which is registered under Companies Act, 2013 or any other Previous Act.

Provisions of Loan To/From Private Limited Company

Loans to Private Limited Company:

There are 3 categories of loans have been prescribed under the Companies Act, 2013.

 

1.       Loans which can be accepted eg. Loan from Directors, Loan from any other company, banking institutions 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, the company can take loan from members etc.

3.      Loans which can not be accepted eg. Private Company cannot accept loans from any Partnership Firm, HUF etc

Below, the provisions of Act have been stated in a more structured manner. 

 

S.No.	Loan From	Conditions, if any
1	Shareholder	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.
2	Director/Relatives of Director	Yes, can accept, but the director will give a Declaration in writing that money is not given out of borrowed funds and company will disclose it in the Board’s report.
3	Employee	Yes, can accept, but the director will give a Declaration in writing that money is not given out of borrowed funds and company will disclose it in the Board’s report.
4	Any other Individual	Can’t accept
5	Proprietorship Firm	Can’t accept
6	HUF	Can’t accept
7	Partnership Firm	Can’t accept
8	Any Company	Yes, can accept Subject to the Provisions of Sec 186.
9	Banks	Yes, can accept
10	Any other Financial Institution which are not incorporated as Banks/NBFC	Yes, can accept
11	Trust	Yes, can accept, but loan received should be non- interest bearing.
12	Outside India	Yes, can accept, subject to the provisions of the Foreign Exchange Management Act, 1999 and rules and regulations made thereunder.
13	Govt.organisation (eg. SIDBI)	Yes, can accept

 

Loan to Directors (Provisions of Section 185 of Companies Act, 2013):

Que: Can a company give loan to a director?

Ans: The provision, Sec 185 of Companies Act does not allow companies to give loan to directors or its relative. Loan cannot be given to any other person in whom the directors are interested.

Company (Private & Public whether small, OPC, Start-ups etc.) shall not directly or indirectly, advance any loan (including loan represented by a Book debt OR

give any guarantee OR

provide any security in connection with any loan taken by:

a) Any director of the company; or

b) Any director of its holding company; or

c) Any partner of any such director; or

d) Relative of any such director;

e) Any firm in which any such director is a partner; or

f) Any firm in which the relative of any such director is a partner;

Note:- Meaning of book debt is amount receivable on account of sales

For details provision kindly refer Section 185 of Companies Act, 2013.

Restrictions of Private Limited Company:

Section 2(68) of the Companies Act, 2013 define the meaning of Private Limited Company and restrain it to Private Limited Company for following:

1.       Restriction on right to transfer of shares, if any

2.      Limit the number of members upto 200 persons except One Person Company defined u/s 2(62) of the Companies Act, 2013

3.      Prohibits any invitation to the public to subscribe for any securities of the Company.

Limit of 200 members shall not include following:

 

Ø Joint Shareholders of Shares shall be counted as on member only

Ø Person who are in employment of the Company

Ø Ex-employee of the Company who have become member while in the employment of the Company and have continued to be member even after termination of employment. 

Some other restrictions of Private Limited Company:

1.       There should be minimum 2 Directors in Private Limited Company

2.      Maximum no of directors in Private Limited Company is 15

3.      There should be minimum two shareholders in Private limited Company

4.     Section 73 prohibits Pvt Ltd Company to take any unsecured loans or deposits from relatives of Directors.

5.      Every company shall hold its first board meeting within 30 days from the date of incorporation. After the first board meeting, every company shall hold minimum four board meetings in a calendar year.

6.      In holding board meetings during the year, there shall not be more than 120 days gap between two consecutive board meetings.

Disclaimer: The content of this article is intended to provide a general guide to the subject matter and that the same shall not be treated as legal advice. For any queries, the author can be reached at cs.vinaypandey@gmail.com  

Author:- Author of this Article is CS Vinay Pandey

About CS Vinay Pandey:-  CS Vinay Pandey is Associate Member of Institute of Company Secretaries of India and Law Graduate from VBSPU, Jaunpur.  He is Co-Founder of Professional Study Point and faculty of Financial Management Paper of CS Professional Programme.

CS Vinay Pandey

(Company Secretary & Writer)

(CS, LLB, B.Com)

cs.vinaypandey@gmail.com  

Mob/Whatsapp: 9911473074

 

Disclaimer: The content of this article is intended to provide a general guide to the subject matter and that the same shall not be treated as legal advice. For any queries, the author can be reached at cs.vinaypandey@gmail.com