Fun and Frolic Ltd. has received ₹5 lakh from its Promoters as unsecured loan in pursuance of the stipulation of credit facilities from Bank. Can the company accept the unsecured loan? What would be your answer if the co

According to Rule 2 of Companies (Acceptance of Deposit) Rules, 2014 any amount brought in by the promoters of the company by way of unsecured loan in pursuance of the stipulation of any lending financial institution or a bank, shall not be treated as deposit, subject to fulfillment of the following conditions, namely:- the loan is brought in pursuance of the stipulation imposed by the lending institutions on the promoters to contribute such finance; the loan is provided by the promoters themselves or by their relatives or by both; and the exemption under this sub-clause shall be available only till the loans of financial institution or bank are repaid and not thereafter; Accordingly, in case of Fun and Frolic Ltd. ₹5 Lakh may be accepted from the Promoters, as the same is in pursuance to stipulation of credit from bank. Once the credit facilities are paid in entirety and the company continues to retain the unsecured loan, it shall be treated as deposit under Companies Act, 2013.