Right,Section 186 of the Companies Act, 2013 applies to the company and its board of directors, and it pertains to the loans, guarantees, and securities provided by the company. It does not directly apply to the employees of the company.employees of the company may be indirectly affected by the provisions of Section 186. For instance, if the company provides a loan or guarantee to a third party, and that third party defaults on the repayment, it may have an adverse impact on the financial stability of the company, which in turn may affect the employees.
MCA (Ministry of Corporate Affairs) has issued General Circular No. 04/2015 on March 10, 2015, clarifying that loans and advances made by companies to their employees, other than managing or whole-time directors, are not subject to the provisions of Section 186 of the Companies Act, 2013.
This exemption applies only if such loans/advances to employees are made in accordance with the conditions of service applicable to employees and are also in accordance with the remuneration policy, where such policy is required to be formulated.
Further this exemption applies only to loans and advances made to employees and does not apply to other types of financial transactions, such as guarantees or securities provided by the company to its employees.
Therefore, companies must ensure that any loans and advances made to their employees comply with the conditions set out in the circular, and any other applicable laws and regulations. Companies should also have a clear remuneration policy in place, where required, to ensure that such transactions are made in accordance with the policy.
Hello Everyone!
Whether the concept of Alternate Director also applicable in case of Foreign Director as he is already residing outside India ?
Hi Folks!
In case of appointment of Alternate Director, whether the Master Data of the Company reflects the Original Director too ?
Hi Everyone!
In what circumstances, special notice is required for the appointment of person other than the retiring auditor ?
Hi Everyone!
What is the offer period of private placement offer cum application letter in case shares are issued on private placement basis ?
Hi Everyone!
Is it possible to file the Unaudited Financial Statements of a Company, if yes, whether there is any option to file the Audited Financial Statements after filing of Unaudited Financials ?
Hi Everyone!
If an individual does not hold majority stake in the member company of the reporting company, whether filing of BEN-2 is applicable or not?
Hi Everyone!
Are there any restrictions or limitations on the number of foreign directors in an Indian Company ?
Hi Folks!
Whether, any assets or liabilities for Indian party (i.e. domestic assets and liabilities) are to be included in the FLA return?
Dear Juhee,
MCA vide its General Circular No. 04/2015 dated 10th March, 2015, has clarified that loans and/or advances made by the companies to their employees, other than the managing or whole-time directors (which is governed by section 185) are not governed by the requirements of section 186 of the Companies Act, 2013. Such clarification shall, however, be applicable if such loans/advances to employees are in accordance with the conditions of service applicable to employees and are also in accordance with the remuneration policy, in cases where such policy is required to be formulated.