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    Inter corporate loan

    Posted By : Anuradha / Published on : 01-Jun-2022 05:11 AM / View : 115 / Comment : 1

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    Can a company give loan to another company having common directors?
    Read more on : loan corporate inter

    • As per section 185(1) of Companies Act, 2013

       

      [(1) No company shall, directly or indirectly, advance any loan, including any loan represented by a book debt to, or give any guarantee or provide any security in connection with any loan taken by,—

      (a) any director of company, or of a company which is its holding company or any partner or relative of any such director; or

      (b) any firm in which any such director or relative is a partner.

      (2) A company may advance any loan including any loan represented by a book debt, or give any guarantee or provide any security in connection with any loan taken by any person in whom any of the director of the company is interested, subject to the condition that—:

      (a) a special resolution is passed by the company in general meeting:

      Provided that the explanatory statement to the notice for the relevant general meeting shall disclose the full particulars of the loans given, or guarantee given or security provided and the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient of the loan or guarantee or security and any other relevant fact; and

      (b) the loans are utilised by the borrowing company for its principal business activities.

      Explanation.-For the purposes of this sub-section, the expression “any person in whom any of the director of the company is interested” means—:

      (a) any private company of which any such director is a director or member;

      (b) any body corporate at a general meeting of which not less than twenty-five per cent. of the total voting power may be exercised or controlled by any such director, or by two or more such Directors, together; or

      (c) any body corporate, the Board of Directors, managing director or manager, whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or Directors, of the lending company.

       

      also there is a notification fo MCA 

      In case of private company - Section 185 shall not apply to a private company-

      (a) in whose share capital no other body corporate has invested any money;

      (b) if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower; and

      (c) such a company has no default in repayment of such borrowings subsisting at the time of making transactions under this section. - Notification dated 5th june, 2015.

       

      Conclusion: a company may grant loan to other private company which is having common directors.

       

      also above mentioned private company in notification is completely exempt from provisions of section 185

      01-06-2022 / 01:03:27 PM
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