Private limited company loan documents: the checklist for companies and LLPs

Private limited company loan documents, in short

A private limited company is a separate legal person. It has its own PAN, its own bank account and its own accounts, and it borrows in its own name. So private limited company loan documents prove three things: that the company exists, that the people signing are allowed to borrow for it, and that it earns enough to repay.

An LLP (limited liability partnership) follows the same logic with different constitution papers. Banks lend to both. Kotak Mahindra Bank, for example, lists private limited companies and LLPs among the business forms it lends to (Kotak Mahindra Bank).

The company checklist

Under the RBI's KYC (know your customer) rules, a lender collects these from a company (RBI Master Direction, KYC):

Beneficial owners are the people who ultimately own or control the company. Lenders usually ask for their personal PAN and address proof too. Accepted identity and address proofs include a passport, driving licence, proof of Aadhaar, voter ID, NREGA job card or National Population Register letter (RBI Master Direction, KYC).

The board resolution

The board resolution is the paper most often missing. It is a decision of the directors, recorded and signed, that says the company will borrow, how much, and who may sign for it. Lenders read three things in it:

• The borrowing is authorised. The resolution names the loan or facility.
• The signatories are named. Only they sign the loan papers.
• The limits fit. The AOA may cap what directors can borrow without shareholder approval, and the lender checks the resolution stays within it.

Ask your company secretary or CA to draft it on the lender's format if the lender gives one.

LLP documents

An LLP does not have an MOA or AOA. Its constitution is the LLP agreement. One bank's guidance lists the LLP agreement, the incorporation certificate and the designated partners' KYC (Bank of Baroda). Designated partners are the partners who carry the LLP's legal duties. Add the LLP's PAN and, as for a company, a resolution or letter signed by the partners authorising the loan and naming who signs.

The financial records

Whatever the constitution, the lender then reads the money. One bank's guidance lists these (Bank of Baroda):

Kotak asks for proof of business continuity for at least three years, such as a Udyam certificate, GST certificate, certificate of incorporation or Shop Act licence (Kotak Mahindra Bank). A company's accounts are usually audited. Lenders also ask for statements of existing loans and a list of directors' other borrowings.

GST registration is needed only above the turnover thresholds in the law, which differ for goods and services and by state (CBIC GST update). Many lenders still prefer GST returns as proof of sales.

Directors' personal records count

Lenders read directors' personal CIBIL records alongside the company's own. CIBIL is TransUnion CIBIL, a credit bureau. Many lenders also ask directors or partners to stand personally behind the loan. See CIBIL score for a business loan.

An example: a small manufacturing company

Take a private limited company that makes packaging. (Illustrative example.) Its file holds the incorporation certificate, MOA and AOA, the company PAN, a board resolution naming the loan and its two signatories, both directors' PAN and Aadhaar, twelve months of bank statements, GST returns for the same months, three years of audited accounts and tax returns, and its Udyam certificate.

The AOA limits the directors' borrowing powers. The company's secretary prepares a shareholders' approval before it approaches a lender. Without it, the lender's first query would be about authority, and the file would wait.

Common gaps in company files

• No board resolution, or one that does not name the loan or the signatories.
• A changed director not reflected in the records the lender holds.
• Statements from one account when the company uses several.
• Registered address that differs from the GST certificate or bank records.
• Accounts not signed or filed for the latest year.

Check your file before a lender does

The free loan readiness check reads your file the way lenders read it and gives you a Capnix score with what to fix first. Related checklists: partnership firm, proprietorship, and the full documents hub.