Loans from relative of director would not be counted as deposits for Private Companies

The Ministry of Corporate Affairs (“MCA”) vide notification dated 15th September, 2015 amended the Companies (Acceptance of Deposits) Rules, 2014 by Companies (Acceptance of Deposits) Second Amendment Rules, 2015 pursuant to which the relative of director of private company can now also give loans to the company out of his/her own funds. 

As per the Companies (Acceptance of Deposits) Rules, 1975 under the erstwhile Companies Act 1956 amount accepted by a private company from the relative of its directors was exempted from the purview of deposits but Companies Act 2013 withdrew the exemption which became a cause of concern for private Companies hence the same has been restored by the MCA vide this notification.

As per the amendment any amount received from a person who at the time of the receipt of the amount was a director of the company or a relative of the director of the private company would no longer be considered as a deposits provided a declaration in writing to the effect stating that the amount is not being given out of funds acquired by him by borrowing or accepting loans or deposits from others and the company discloses the details of money so accepted in the Board’s report.

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