CA Intermediate · Corporate and Other Laws · Acceptance of Deposits by Companies
Kaveri Engineering Pvt Ltd, a private company, has a paid-up share capital of Rs 50 lakh. It borrows Rs 8 lakh from one of its directors, who gives a written declaration that the amount is not out of funds borrowed by him from others. Under the Companies (Acceptance of Deposits) Rules, 2014, how is this amount treated?
The Rs 8 lakh is not a deposit. The Rules exclude amounts received from a director when the director gives a written declaration that the money was not obtained by borrowing or accepting loans or deposits from others, and the company discloses the amount in its financial statements.
- AIt is not a deposit, as money received from a director with such a declaration is excluded from depositsCorrect
- BIt is a deposit, because any money from a director is always a deposit
- CIt is a deposit, because it exceeds the paid-up capital limit for director loans
- DIt is not a deposit only if the company is a public company
Explanation
The Rules exclude from deposits any amount received from a director of the company or a relative of a director of a private company, provided the director furnishes a written declaration that the money is not given out of funds acquired by borrowing or accepting loans or deposits from others. The conditions are met, so it is not a deposit. Option 4 is wrong because the exclusion for directors applies to companies generally.
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