Silver Private Limited was incorporated in 2016 having its registered office at Gurugram, Haryana. It is registered with an authorised share capital…

CA Intermediate · Corporate and Other Laws · MTP · May 2024
Silver Private Limited was incorporated in 2016 having its registered office at Gurugram, Haryana. It is registered with an authorised share capital of 10 crore divided into 1 crore equity shares of 10/- each. The paid-up share capital of the company is 50 lakh divided into 5 lakh equity shares of 10/- each. The company is in manufacturing of rubber parts to be used in manufacturing of parts of passenger vehicles. Mr. Raj and Mr. Pawan are directors of the company. Mr. Siddharth (son of Mr. Raj) on January 8, 2022 had advanced a loan of 50 lakh at an interest rate of 8% p.a. and the loan is expected to be repaid after a period of thirty six months. Silver Private Limited intends to accept deposits of 60 lakh from its members for the purpose of expansion of its business. The financial particulars of the company are as below mentioned: S. No. Particulars Amount (₹) 1 Paid-up share capital 50 lakh 2 Free Reserves 20 lakh 3 Security premium 10 lakh 4 Borrowings from banks 65 lakh 5 Turnover 200 lakh As on the date of acceptance of deposits, the company has not defaulted in repayment of borrowings along with interest thereon. The Company Secretary of the company informed Board of Directors of the company that they need to appoint an internal auditor for audit of the company. The Board stated that statutory auditor is already performing audit function and there is no need to appoint internal auditor as it causes additional burden on the company. The company require funds for the purpose of meeting working capital requirements. The company has approached the bank for meeting working capital requirements and has availed a loan of 65 lakh from bank. The loan is secured by the personal guarantee of the directors of the company. On the basis of above facts and by applying applicable provisions of the Companies Act, 2013 and the applicable Rules therein, choose the correct answer (one out of four) of the following Multiple Choice Questions (MCQs 1-5) given herein under: -
(A) It will be treated as deposit as the loan is advanced by Mr. Siddharth who is neither director nor shareholder of the company.
(B) It will be treated as deposit as the loan is given by relative of the director.
(C) It will not be treated as deposit as Mr. Siddharth has given loan to the company at an interest rate of 8% p.a.
(D) It will not be treated as deposit if Mr. Siddharth gives a written declaration to the effect that loan is advanced by him from his own source of funds, not from borrowings or accepting loans or deposits from others and the company shall disclose the details of money so accepted in the Board's Report.

Suggested Answer and Working Notes:

Correct Answer: Option (D)

It will not be treated as deposit if Mr. Siddharth gives a written declaration to the effect that loan is advanced by him from his own source of funds, not from borrowings or accepting loans or deposits from others and the company shall disclose the details of money so accepted in the Board's Report.

Topics: The Foreign Exchange Management Act, 1999, Accounts of Companies

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