TaxTMI 
TaxTMI 
Is it possible for a private company to accept loans from a partnership firm where directors are also partners? if yes, what limits are applicable? And if no, what other ways fund can be introduced the company?
Loans from partnership firm where directors are partners
17 Apr 2025 
2 Replies 
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Related party loans: private companies may accept loans from partnership firms with director partners, subject to approvals and arm's length terms.
Private companies can accept loans from partnership firms where directors are partners provided related party rules are observed: disclose and obtain board approval and, when limits trigger, shareholder approval under Section 188; ensure the transaction is not treated as a prohibited director loan under Section 185; verify deposit provisions and exemptions under Section 73; document legitimate fund sources, use banking channels, charge arm's length interest to satisfy tax provisions, and ensure the lender complies with applicable money lending laws. (AI Summary)
Private companies can accept loans from partnership firms where directors are partners provided related party rules are observed: disclose and obtain board approval and, when limits trigger, shareholder approval under Section 188; ensure the transaction is not treated as a prohibited director loan under Section 185; verify deposit provisions and exemptions under Section 73; document legitimate fund sources, use banking channels, charge arm's length interest to satisfy tax provisions, and ensure the lender complies with applicable money lending laws. (AI Summary)