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February 2024

Loan From Promoters: An Insight

By Pramod Prabhudesai, Chartered Accountant
Reading Time 18 mins

This is a less-covered area—the words directors and promoters are used synonymously but this may not be always true and the consequence of these two on loans and deposits under the Companies Act, 2013 (CA 2013) and the Companies (Acceptance of Deposits) Rules, 2014 (AODR) are discussed hereunder:

The term “deposit” is defined in clause (31) of section 2 of the CA 2013 that states that ‘a deposit includes any receipt of money by way of deposit or loan or in any other form by a company, but does not include such categories of amount as may be prescribed in consultation with the Reserve Bank of India’.

Rule 2(1)(c) of AODR prescribes categories of amounts which shall not be termed as ‘deposits’ subject to meeting the prescribed conditions. It should be noted that receipt of money in a different form is also covered under the term “Deposit”.

LOAN AND DEPOSIT

Quite often, these two terms are used synonymously and interchangeably but these terms are different. A loan is repayable when it is contracted / incurred. But this is not so with a deposit. Either the repayment will depend upon the maturity date fixed therefore or the terms of the agreement relating to the demand, on making of which the deposit will become repayab

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