Advertise With Us

    Section 186 of CA 2013

    Posted By : Damini / Published on : 11-Jun-2020 07:10 AM / View : 212 / Comment : 1

    Print button
    Can you please clarify that Section 186 of CA 2013 and under linked Rules are applicable ONLY with Companies and not a partnership, LLP, etc
    Read more on : section

    • Section 186 of the Companies Act, 2013 and the rules made thereunder apply only to companies, as defined under the Act. It does not apply to partnerships, LLPs (Limited Liability Partnerships), or any other type of business structure.

      Partnerships and LLPs are governed by their respective laws, and the provisions related to loans, guarantees, and investments differ for these types of entities. For example, LLPs are governed by the Limited Liability Partnership Act, 2008, which has its own provisions related to loans, guarantees, and investments made by an LLP.

      Therefore, it is important to understand the specific legal provisions applicable to the type of business structure that you are dealing with and seek professional advice accordingly.

       

      Section 186 of the Companies Act, 2013 deals with loans and investments made by a company. It lays down the following provisions:

      1. Any company can make a loan, give a guarantee or provide security in connection with a loan made to any person or body corporate, subject to the provisions of this section.

      2. The total amount of loans, guarantees or securities provided by a company, along with the investments made, cannot exceed 60% of its paid-up share capital, free reserves and securities premium account or 100% of its free reserves and securities premium account, whichever is more.

      3. Before making any loan, providing any guarantee or security or making any investment, the company must obtain the approval of its Board of Directors by passing a resolution at a meeting of the Board. The resolution must specify the purpose for which the loan, guarantee or security is being provided or the investment is being made.

      4. The company must disclose the details of any loans made, guarantees or securities provided or investments made in its financial statements for the relevant financial year.

      5. The provisions of this section do not apply to loans made, guarantees or securities provided or investments made by a banking company, an insurance company or a housing finance company.

      It is important to note that any violation of the provisions of this section can lead to severe penalties and consequences, including fines, imprisonment and disqualification of directors.

      19-04-2023 / 10:39:22 AM
      Reply
    Please Select File:



Other Queries from Damini
Latest Queries
Like us on Facebook
Follow Us on Twitter

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

+91-9988424211 or ask@compliancecalendar.in