Company Law - deposits
Raja Rajeswari S
(Querist) 13 October 2009
This query is : Resolved
A private limited Co. has got unsecured loans from the its shareholders? S. 3(1)(iii) prohibits a private co. from accepting deposits from public other than its shareholders, directors or their relatives. Does the word relative mean the relative of shareholder too? If not does the above co. violate the s. 3(1)(iii)?
Guest
(Expert) 13 October 2009
As per the exact wording of Section 3(1) (iii) (d) "prohibits any invitation or acceptance of deposits from persons other than its members, directors or their relatives".
Here, the words "or their relatives", include members and also directors. So, no violation, on the part of the company. Further, as per your querry, it seems that the company has just obtained unsecured loans, which does not fall under the purview of 'deposits'.
Manish Singh
(Expert) 20 October 2009
unsecured loans fall under the term deposit but in this case the loan has been procured from a private placement which is nowhere barred under the companies act.
