Investment, Loan & Deposit
Submitted bY SubmitteD To
Aman Kumar
CUSB2013125011
Dr. Pradip Kumar Das Sir
Section –A Associate professor
B.A.LL.B.(Hons.) SLG, CUSB
[2020-25]
Contents
Introduction
Investment & loan u/s 186
Requirement for loan & investment
Register of loan made
Loan to director u/s 185 and comparison b/w sec – 185 and 186
Punishment
Deposit and depositor
Applicabale provisions section [73- 76 ] and its applicability
Conclusion
Introduction
Investment means putting money into assest such as stock bond etc
with the expectation that money will grow.
Loan is simply a form of debt incurred by an indivisual or other entity .
Deposit means something placed for safekeeping like money deposited
in bank .
The purpose of investment , loan , deposit under company law are for
safety reason for generating income and for capital gain
Investment & loan under section 186
Section 186 of company act 2013 talks about both investment and loan
that can be made by company.
It sates that company can not make investment more than two layers of
investment company.
Section 186 also states that company can not directly or indirectly lend
money to anyone .
Company can’t purchase and subscribe the shares of any other
corporate entity.
Requirement for loan & Investment
APPROVAL OF BOARD : Approval of the board shall be obtained by
unanimous resolution passed at board meeting with the consent of all
the director present in that meeting .Approval of board is required in all
cases irrespective of amount of loan investment etc.
APPROVAL OF MEMBERS BY PASSING SPECIAL
RESOLUTION : If the loan is more than the limit specified u/s 186[2]
then special resolution is needed. Limits are – 60 % of paid up share
capital +security premium +free reserve [such reserve available as per
the latest audited balancesheet of company for distribution as dividend
or 100% of security premium + free reseve.
Register of loan & investment
APPROVAL OF PUBLIC FINANCIAL INSTITUTION [PFI]
It is needed if the amount exceeds the limit given u/s 186 and if there is
default in repayment of loan.
REGISTER OF LOAN AND INVESTMENT - According to section
186[9] every company giving loan and making investment shall keep a
register . Register shall be maintained from the date of acquisition in
the form no- MBP 02.The register shall kept at the registered office of
company in custody of company secretary. It can be maintained either
manually and electronically.
Loan to director section -185
comparison b/w Sec- 185 & 186
No company shall directly or indirectly advance the loan to any director
or any other person in which director is interested.
But the provision is not applied to managing director and whole time
director.
Comparison b/w Sec-185 & 186 : section 185 is applicable in case of
loan guaranteed by the company to its director or any other person in
whom the director is interested , whereas section 186 talks about the
limit upto which company can make loan and investment.
Punishment
Punishment is given under section 187 [4] .
If company violates the provision it shall be punishable with 25000 to
25 lakh.
In case of officer’s default then shall be punishable with imprisonment
upto 6 months and fine of 25 thousand to 25 lakh , or both.
Deposit & Depositer
Deposit is given in section 2[31] of company act 2013 , 2[c] of company
[acceptance and deposit] rules 2014.
Deposit includes any receipt of money by way of deposit or loan or in
any other form by a company.
Deposit does not include-
1.Any amount received from central or state government .
2.Amount received from banking company, SBI, subsidiary bank etc
3.Any amount received against issue of commercial paper
4.Any amount received from any other company
Continued…
The term depositor means any member of the company who has made a
deposit with the company in accordance with section 73 [2] of the
company act, or
Any person who has made a deposit with a public
company in accordance with section 76 of the act
Applicable Provisions & Applicability
Prohibition of acceptance [ section- 73] : few condition have to be
fulfilled to be fulfilled to accept deposit .
A resolution has to be passed in general meeting .
A circular has to be issued with details like
financial statement , credit rating ,total number of deposit etc
20% of total deposit in the
following financial year to be deposited in a secret account .
A security have to be
provided for deposit accepted
Continued…
Repayment of deposit [section -74]
company must file a form DPT04 within 3 month from the
date on which payment become due .
The form will include the details of all the deposit
accepted by company , unpaid amount, arrangement made for these
payments . Repay the deposit within 3 years of commencement of act or
expiry of the term of those deposits whichever is earliest .
Continued…
Damages for fraud [ section 75 ] : when company fails to repay
within stipulated time or extended time given by tribunal then
Acceptance of deposit from public by certain company
[section 76] : deposit from public may be accepted by certain
company who has networth not less than 100 crore and turnover not
less than 500 crore
Punishment section - 76[ A] : if company violated the provisions
then fine will be 1 crore to 10 crore . And if there is default of officer
then he shall be punishable with imprisonment upto 7 years and fine
between 25 lakh to 2 crore or both .
Conclusion
From the above discussion and relevant provisions of company law and
other related acts . I am of the opinion that for survival and growth ,a
company needs to borrow, lend and invest. deposit is also good source
of short term capital. These acts also prescribes the remedies in case of
violation of the provision of the act.
