Majority of Private Limited Companies have accepted unsecured loans from Director’s relatives or from its members as allowed under the provisions of Companies Act, 1956. As per Companies (Acceptance of Deposit) Rules, 2014 as applicable from Ist April 2014 all such Companies now have to refund such unsecured loan/deposit immediately. As per rule 2(viii) of Companies (Acceptance of Deposit) Rules, 2014, the Companies [private and Limited both] can accept unsecured loan or deposit from Director of the company provided further that such amount is not a borrowed amount and can accept inter corporate loan(s) from another body corporate and not from any other person. As per companies Act 2013, if the private company has accepted any loan from any person except director, then they have to file a statement in prescribed form up to 30th June 2014 with the ROC. The Companies which fails to refund such unsecured loans already accepted from Directors’ relatives or members immediately shall be treated as deposit and as a consequence defaulting Companies and its officer in default may face penalty/prosecution proceedings under the provisions of Section 73 to 76 of the Companies Act, 2013.
Definition of Deposits Under Companies Act, 2013
The definition of the Deposits was tightened in the Companies Act, 2013. As per the definition deposits includes…
- Any amount received against subscription to any securities including share application money provided the securities are not allotted within 60 days from the date of receipt of the application money or advance and money has not been refunded in 15 days thereafter.
- Any amount received from Director of the company, if does not furnish a declaration that the amount given is not out of borrowed funds.
- Any amount received from an employee of the company exceeding his annual salary in the nature of interest bearing security.
- Any amount received in the course of or the purpose of the business for the following :-
- As advance for the supply of goods or provision of services, provided such advance is appropriated against supply of goods or provision of service within 365 days from the receipt of such amount,
- As advance received in connection with consideration for property under an agreement or arrangement,
- As security deposit for the performance of the contract for supply of goods or provision of services,
- As advance received under long term projects for supply of capital goods,
If any amount received above becomes refundable, then such amount received shall be deemed to be a deposit after the expiry of 15 days from the date it became due for refund.
Action to be taken
Ø Do not accept any unsecured loans from the relatives of directors or any person other than directors of the Company, which will be treated as deposits as per the above definition
Ø Before accepting any unsecured loan from Directors, take a declaration from the Director that the amount given is not out of borrowed funds
Ø Any Unsecured Loans already existing in the books of account from other than directors need to be closed before 31/03/2015
Penalty for Non-Compliance
Penalty under Section 74(3) (Repayment of deposits, etc., accepted before commencement of this Act)
If a company fails to repay the deposit or part thereof or any interest thereon within the time specified in sub-section (1) or such further time as may be allowed by the Tribunal under sub-section (2), the company shall, in addition to the payment of the amount of deposit or part thereof and the interest due, be punishable with fine which shall not be less than one crore rupees but which may extend to ten crore rupees and every officer of the company who is in default shall be punishable with imprisonment which may extend to seven years or with fine which shall not be less than twenty-five lakh rupees but which may extend to two crore rupees, or with both.
Changes in Income Tax Provisions regarding Unsecured Loans applicable w.e.f 01.04.2015
Amended Provisions of Sec 269SS /269TT:
In order to curb generation of black money by way of dealing
s in cash in immovable property transactions it is proposed to amend section 269SS and section 269T of the Act.
Section 269SS of the Act is proposed to be amended to provided that no person shall accept from any person any loan or deposit or any sum of money whether as advance or otherwise in relation to transfer of immoveable property otherwise than by an account payee cheque or account payee bank draft or by electronic clearance system if the amount is Rs. 20,000 or more. Section 269T is proposed to be amended to provide that no person shall repay any loan or deposit made with it or any specified advance received by it otherwise than by account payee cheque or electronic banking account if the amount is Rs. 20,000 or more.
Consequences
If a loan or deposit is accepted in contravention of the provisions of section 269SS then a penalty equivalent to the amount of such loan or deposit may be levied.
Action to be taken
No amounts exceeding Rs. 20,000/- either by way of advance or sale/transfer of immovable property to be received/ refunded other than by way of Account Payee cheques/demand drafts/electronic banking.
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