## Regulatory Disclosures: Loans to Promoters, Directors, KMPs and Related Parties

Under Schedule III of the Companies Act, 2013, additional disclosures are required when a company grants loans or advances in the nature of loans to certain connected persons.

### Who Triggers This Disclosure?

Loans/advances in the nature of loans granted to:

Promoters
Directors
Key Managerial Personnel (KMPs)
Related Parties (as defined under Companies Act, 2013)

### What Conditions Trigger Disclosure?

The disclosure is required when such loans are:

(a) Repayable on demand, OR
(b) Granted without specifying any terms or period of repayment

### What Must Be Disclosed?

For each category of borrower:

1. Amount of loan/advance outstanding (₹ in Lakhs)

2. Percentage to total loans and advances in the nature of loans

### Calculation Formula

```

Percentage = (Outstanding amount for that borrower ÷ Total outstanding loans) × 100

```

### Why This Disclosure Matters

This requirement prevents undisclosed related-party financing arrangements that could constitute misuse of company funds. The auditor must verify these disclosures and ensure they are complete and accurate.

Worked example

### Example 1

Q (based on Q24): LD Ltd. has the following outstanding loans as at 31.03.2024 (₹ in Lakhs): X (Promoter) 15, Y (Director) 25, Z (KMP) 5, A (Related Party) 10, Others 65. Total = ₹120 Lakhs. Prepare the required Schedule III disclosure.

Type of Borrower	Outstanding (₹ Lakhs)	% of Total
X (Promoter)	15	15/120 × 100 = 12.5%
Y (Director)	25	25/120 × 100 = 20.83%
Z (KMP)	5	5/120 × 100 = 4.17%
A (Related Party)	10	10/120 × 100 = 8.33%

Note: 'Others' (₹65 Lakhs) is not covered by this specific disclosure requirement — only the four categories above require this treatment.

⚠️ Common exam mistakes

Using maximum loan amount during the year (instead of outstanding balance) for the percentage calculation
Forgetting that 'Others' (non-related parties) are excluded from this specific disclosure — only promoters, directors, KMPs, and related parties are listed
Not including related parties as defined under Companies Act 2013 — students sometimes only think of Directors and KMPs
Calculating percentage against maximum loan granted during year rather than total outstanding at balance sheet date

Reference:

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Regulatory Disclosures – Loans to Promoters, Directors and KMPs

Worked example

⚠️ Common exam mistakes