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Investing personal funds into company


02-May-2023 (In Corporate Law)

Hello, I have incorporated a company with Rs. 1 lac authorised capital. I have also opened a bank account by transferring Rs. 1 lac from the directors (in the ratio of their equity holding in the company). My question is that now if I want to put money into the company to meet expenses, what is the best option? 1. Should I transfer from my personal account to the company account and show it as a loan to the company? 2. Should I transfer more money from the directors' accounts to the company accounts and show it as equity? What are the pros and cons for both of the above? Thanks

Answers (2)

Answer #1
716 votes
Both options are easily feasible. In the event of a loan from director you would need to file certain documents pertaining to an undertaking that the loan from the director is from personal funds and not borrowed funds. In the event of putting in the money as equity, you would have to do all the compliances with respect to actual issuance of equity shares. If the amounts to be provided are in the form of small incremental tranches then I would recommend the option of making a loan to the company with the right to convert into equity in the future, at the time of making individual loan amounts. If the amount to be provided to the company is a large amount I would recommend doing an actual issuance of shares. Do get in touch for further details.
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Advocate Aditya Shamlal

Adv. Aditya Shamlal

LawRato Delhi | 5+ Answers
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Answer #2
874 votes
Lending money to the company will fetch you an assured interest while contributing money in the share capital will entitle you to proportionate profit of the company by way of dividend, hope that gives you a fair idea about funding. further for more clarification provide the existing structure of the company.
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Advocate Vivek Pathak

Adv. Vivek Pathak

LawRatoDelhi | 25+ Answers
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