2. WHAT IS A PRIVATE
LIMITED COMPANY?
A private limited company is a voluntary association of
not less than two and not more than fifty members.
It is one whose liability is limited, the transfer of whose
shares is limited to its members and who is not allowed to
invite the general public to subscribe to its
shares or debentures.
3. •It has an autonomous legal existence
•It is comparatively less cumbersome to organize and
manage.
•The liability of its members is limited.
•The shares allotted to its members are also not freely
transferable between them.
These companies are not allowed to invite public
to subscribe to its shares and debentures.
•It enjoys continuity of existence
i.e. it continues to exist even if all its
members die or desert it.
4. LOAN OR ADVANCE IS GIVEN BY A PRIVATE
LIMITED COMPANY
• Shareholder holding 10% or more voting power in that
company
•Concern in which, Shareholder who holds 10% or more
voting power in the company, also holds 20% or more of the
income of that concern at any time during the previous year
• Concern i.e. Company in which, Shareholder
who holds 10% or more voting power in
the company, also holds 10% or more
voting power of that concern at any
time during the previous year.
5. FACTORS TO BE CONSIDERED WITH REGARDS TO
LOAN OR ADVANCE
•A loan for few days would be within its ambit.
Section 2(22)(e) does not say that in order to come in the category
of deemed dividend, loan should be of particular minimum duration.
Thus duration of loan is not material
• A loan of money results in a debt but every debt does not involve a
loan
• Payment by the company towards the
personal expenses of the shareholder would
be treated as deemed dividend
6. •Loan obtained by the shareholder through propriety
concern would be treated as deemed dividend under section
2(22)(e) .
•Shareholder doing business with company and always having debit
balance
Explanation: When a shareholder has business with the company
and when his accounts with the company is always on debit side,
the amount in question would be regarded as loan by the company
to the shareholder.
•Money advanced as loan by company
substantially doing money lending
business could not be treated as
deemed dividend under
section 2(22)(e)
