1. Can a company accept loan from Director?

Yes, but the director will give a Declaration in writing that money is not given out of borrowed funds and company will disclose it in the Board’s report.  

2. Can a company accept loan from Shareholders/ Promoters & Their Relative?

Yes, but subject to the condition as specified in deposit Rules. Deposit Rules: for acceptance of deposits from shareholders and their relative:

  • Company can accept maximum 35% of (paid up capital + Free reserves + securities premium account) – This limit is for existing and proposed deposits.
  • Company has to follow the procedure like issuance of circular, depositing insurance, credit rating, appointment of trustee etc.
Exemption for Private LimitedCompany: After Notification G.S.R. 464(E) dated 05/06/15, a Private Company can accept 100% of (Paid up capital+ Free Reserves+ Securities Premium account) without fulfilling the conditions mentioned in sec. 73(2) clause (a) to (e) i.e. issuance of circular, depositing insurance, credit rating, appointment of trustee etc.

3.Can a company accept loan from Employee?

Yes, up to the employee’s annual salary (there should be a contract of employment with the company) in the nature of non- interest bearing security deposit.

4.Can a company accept loan from any other Individual/ Proprietorship Firm/ HUF /Partnership Firm?

No, because it is prohibited by the definition of Private Company.

5.Can a company accept loan from any Company?

Yes, but comply with Sec 186wherein the conditions are specified for the lender. Sec 186: A Company (Private or Public) can’t give loan to any other person or body corporate which is more than: 60% of its Paid up Capital + Free Reserves + Security Premium Or 100% of Free Reserve + Security Premium If this limit is exceeded, prior approval by special resolution in general meeting is required. However, in case a loan or guarantee is given by a company to its wholly owned subsidiary company or a joint venture company than special resolution is not required.

6.Can a company accept loan from Banks / any other Financial Institution which are not incorporated as Banks?


7.Can a company accept loan from Trust?

Yes, but loan received should be non- interest bearing.

8.Can a company accept loan from outside India?

Yes, but subject to the provisions of the Foreign Exchange Management Act, 1999 and rules and regulations made there under.