Can Private Limited Company take Loan from Public?

Can Private Limited Company take Loan from Public?

The Companies Act, 2013 as well as the set of laws laid by the Reserve Bank of India impedes the approval of deposit in case of a Private Limited Company. As per the Companies Act, 2019, only banking companies, non-banking monetary companies, housing finance company, as well as company enumerated by the Central Government, are permitted to acknowledge invitation, recognize or regenerate deposits from the public. Consequently, Private Limited Companies are strictly for bidden from receiving the public deposit.

Are Private Companies allowed to borrow?

As per as the Companies Act, 2013, Private Companies are permitted to borrow from the following entities.

1. Directors
2. Shareholders
3. Members

When any amount is received from an entity who at the moment of acceptance was a Director of the Company, then that won’t be considered as Deposit. Certain clauses are considered while acknowledging the deposits.

1. Location at the moment of reception of Deposit will be taken into account.
2. Director is obligated to submit a declaration to the Company, that sum is not being given as funds, which is acquired by him by borrowing or acknowledging loans or deposits from others.
3. The Company can accept any amount of loan from the Director.

What are Deposits as per the Companies Act 2013?

As per the Companies Act, 2013, deposits can be described as the following.

1. When any amount is received against payment to any securities as well as share application money, on the condition that the securities are selected within 60 days from the date of receipt of the application money or prior to that date, then it is considered as a deposit. Under any circumstances, if the securities are not prearranged within 60 days then the amount should be refunded within 15 days. In that case, it shall be treated as a deposit after completion of 15 days.
2. When an amount is received from Director of the company, on the condition that the Director provides a statement mentioning that the amount given is not out of borrowed funds.
3. When an amount is received from an employee of the company, provided that it did not exceed his or her annual salary in the disposition of the non interest-bearing.

Security for the repayment

The Company may offer security for the reimbursement of the deposit with interest by the introduction of a charge on the assets of the Company. In case, the deposit is not so secured, the Company shall assert in the declaration that the deposit is unsecured. When a Company provides Security, then it is required to file form CHG-1 within 30 days of the introduction of charge with ROC. In addition, a company has to maintain at its registered office, a discrete register solely dedicated to deposits acknowledged in the prescribed manner

1. Deposit Application Form
2. Deposit Receipt and
3. Register of Deposit

Stipulation for acceptance of Deposit

1) A Company shall not accept or renew secured deposit or unsecured deposit, which is repayable on the plea or upon receiving a notice within a period of fewer than 6 months or beyond 36 months, starting from the date of receipt or renewal of such deposit.

2) Deposits may be accepted in Joint names. However, it should not exceed 3 names.

3) A company which is not eligible is entitled to accept deposit only to the extent of 25% of the aggregate of paid up share investment and free reserves.

4) In addition, eligible companies may accept deposit from members, but that shall not exceed 10% of the aggregate of paid-up plea share capital and free reserves. In case of a deposit made by others, it shall not exceed 25% of the aggregate of paid up share capital and free reserves. This excludes deposit from members.

5) Interest, as well as Brokerage payment, should not exceed the highest rate of interest or brokerages as approved by the RBI in case of acceptance of deposits by Non-Banking Finance Companies.

Filing of Return of Deposit

All Companies are liable to file on or prior to the 30th of June, on a yearly basis. The filing of return is done with the Registrar in form DPT-3 and the fee is submitted along with the form. Thus, “Can Private Limited Company take a loan from the public?” provides information regarding the functioning of Private Limited Companies in India.