Foreign subsidiary

    Posted By : Deepali / Published on : 16-Oct-2017 10:51 PM / View : 241 / Comment : 2
    Print button
    Can a Indian holding company receive a short term loan from its foreign subsidiary? If yes, after receiving can these funds to used in other associate companies?
    Read more on : subsidiary foreign

    •  

      Any loan made by a holding company to its wholly owned subsidiary company or any guarantee given or security provided by a holding company in respect of any loan made to its wholly owned subsidiary company; or (d) any guarantee given or security provided by a holding company in respect of loan made by any bank or financial institution to its subsidiary company: Provided that the loans made under clauses (c) and (d) are utilized by the subsidiary company for its principal business activities".

      Since all subsidiary companies would be required to act on the directions/instructions of the Board of the lending company, Section 185 (e) seemed to include in its prohibition the giving of loans, securities and guarantees provided by holding companies to its subsidiaries. However, related Rule 10 of the Companies (Meetings of Board and its powers) Rules 2014, clearly envisaged and exempted from the restrictions of Section 185: (a) loans, guarantees or security given by a holding company to its wholly owned subsidiary and (b) guarantees and securities provided by holding companies to its subsidiaries with respect to loans given by a bank or a financial institution.

      The issuance of the rule created more confusion than clarification since a rule cannot override the provisions of the Act and further a distinction, whether intended or not was carved out for loans to wholly owned subsidiaries and guarantees and security for subsidiaries (not necessarily wholly owned). This led to an unusual situation of loans by holding companies to subsidiaries not permitted by allowing guarantees and security

       

      17-10-2017 / 11:44:51 AM
      Reply
    • True That !

      21-10-2017 / 11:33:19 AM
      Reply



Other Queries from Deepali
Founders
Unanswered Queries
Search What's New By Date
What's New on
Like us on Facebook
Follow Us on Twitter
Latest ArticlesSubmit Article

We are always here to help you. Don’t hesitate to contact us anytime!

011-42345111 or ask@compliancecalendar.in