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The government has given a temporary relief to private companies on money taken from their shareholders, directors and relatives.
The ministry of corporate affairs has clarified these amounts will not be taken as ‘deposits’ under the new companies law. However, from April 1, 2014, these would be taken as deposits and would draw some stringent conditions such as obtaining of credit rating and deposit insurance. These would also have to be returned within a year if these conditions were not adhered to, according to the new Companies Act, 2013.
Sai Venkateshwaran, the head of accounting advisory services, KPMG in India, said, “This is more of a transitional relief to these private companies, who have thrived by raising funds from friends and relatives, at a time when they are unable to access public funds or borrowings.”
The new companies law has changed a provision in the older version of the Act, which had not treated these loans as deposits, and imposed stringent conditions on them.
However, the companies have to disclose these amounts and the accounting head under which they are shown in the notes to their fianncial statements from the year beginning 1 April, 2014 onwards.
