Site

Law Courses

LCI Learning

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

Jayanta Bandyopadhyay 20 August 2024

Bank loan & promoters / borrowers ambiguity

Ours is an unlisted public limited company having 6 promoters cum shareholders and 3 directors ( all are members of a family).

Now we are taking a loan from the Bank and the Deed of Undertaking mentions " Promoters are interested in Borrower's business.....& until final settlement , amount recovered by Promoters from Borrowers, be held by Promoter in trust for Lender.

My queries :-

1. Promoters are also borrowers (Company) and by virtue of 100% holding, are quite synonyms with Company.

2. MCA Portal recognises Directors- there is no mention of Promoters.

Would it pose any legal issue in the distant future?

Please guide.

Learning

2 Replies

Rama chary Rachakonda (Secunderabad/Telangana state Highcourt practice watsapp no.9989324294 ) 20 August 2024

The query revolves around the distinction between promoters and directors in a company, specifically in the context of borrowing and potential legal implications. Here's a concise breakdown: 1. _Promoters vs. Directors_: While often used interchangeably, promoters and directors have distinct roles: - Promoters: Founders or initial shareholders who set up the company. - Directors: Appointed to manage and oversee the company's affairs. 2. _MCA Portal_: The Ministry of Corporate Affairs (MCA) Portal primarily recognizes directors, as they are responsible for the company's governance and compliance. 3. _Potential legal issues_: The ambiguity between promoters and directors might pose legal issues in the future, particularly if: - Loan agreements or documents inadequately define the roles and responsibilities of promoters and directors. - Disputes arise regarding liability, obligations, or decision-making authority. To mitigate potential risks: 1. _Clear documentation_: Ensure loan agreements and company documents explicitly define the roles, responsibilities, and obligations of promoters and directors. 2. _Define decision-making processes_: Establish clear procedures for decision-making, especially regarding borrowing and financial matters. 3. _Compliance_: Regularly review and update documents to ensure compliance with relevant laws and regulations.

T. Kalaiselvan, Advocate (Advocate) 20 August 2024

The articles of association or memorandum of association will provide you the particular clauses in this regard which may be a guideline too.

Additionally, you can discuss with a consultant on all such further issues.

Recent Topics

Stay updated with latest Posts!