purchase of property by company


 

 

Hello.....

can a company purchase immovable property in the name of one its Director?

 the following are contents -

  • Payment by Company 
  • property will be showing in the Balance sheet of the Company and claiming depreciation
  • Registration of property in the name of Director to save stamp duty
  • No rent agreement is made and paid by company

kindly discuss the issue

 
Reply   
 
Company Secretary

Khushboo, remember the concept of separate legal entity?

 
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SR. ADVOCATE

Dear Member:

As far as the registration of property act is concerned there is no harm in purchasing property in the name of the   Director.

If the co. approves purchase and ratifies the action and the payment and brings the registered property in to the business of the co. and pool it there is no illegality as far as the business of the co is concerned.  Many a time the promotors or the directors purchase property in their name and subsequently bring it  in to the business and  in return get allotted shares in their name to the value of the property.  Now to get registered the same in the name of the co. is the choice of the share holders.  But this is not possible in a public limited co. where you invited shares from the public.

Since the property is pooled in the business you are entitled for tax benefits.  But when it comes for creration of charges the financial institutions may ask for additional documentation. After pooling the property in to the business you need not make any other documents.

As far as other laws are concerned there is no impediment.

Thanks.

AAR. KRISHNAN

 
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Asst, Manager-Legal

Yes KHUSHBOO go head with SKJ-Advocate advise, he does all the route for your query.

I'm also workign in Public-listed company in Bangalore, recenctly we purchased the immovabale property in the company name rep: by its MD.

When at the time of AGO meeting these things should be disclosed, nocompany will buy the property on the name of MD OR any other DIRECOTRS, as said our leanred friend SKJ-ADCOVCATE, aduit dept may object if Director buys the same or

Imp share holders will strongly oppose the move at time of AGO meeting.

Regards

BASAVARAJ.R

 
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Company Secretary

Keep aside the problem at the time of audit and share holders approval, this transaction is neither legal nor logical.

When the Company is making the payment, the title should pass on to the Company- Director should not get  the title.

 
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POWER OF DEFENSE IS IMMENSE

Really wonderful and to the point answer.

 
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