Section 185 of the companies act 2013

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 June 2014 sir i have doubt.

A public limited company has given loan to private limited company (100% Subsidary). Also all directors of subsidary company are director of holding company.

So please let me know is such loan is allowed sec. 185 of companies act 2013 or not??

CS Divesh Goyal

CS Divesh Goyal (Expert)
Follow

16 June 2014 100% subsidiary mean wholly own subsidiary.
Accod to section 185 a company can give loan to wholly own subsidiary company.
If you want article on this section mail me ur email id

Message likes : 1 times

Ankur Garg

Ankur Garg (Expert)
Follow

16 June 2014 Exemption/Relief provided by Rules w.r.t. Section 185 Loan to Directors read with Rule 10 of The Companies (Meetings of Board and Its Powers) Rules, 2014 (Chapter 12).

(1) 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 is exempted from the requirements under this section; and

(2) 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 is exempted from the requirements under this section:

Provided that such loans made under sub-rule (1) and (2) are utilised by the subsidiary company for its principle business activities.

As per my understanding direct loan, without complying section 185, from Holding to subsidiary is possible only when the borrower company is wholly owned subsidiary Company.

However a holding company can fund its subsidiary Company indirectly by providing guarantee or security in respect of loan made by any bank or financial institution to its subsidiary company.

Message likes : 1 times

Upgrade to CAclubindia Pro. Subscribe Now!

CS Divesh Goyal

CS Divesh Goyal (Expert)
Follow

17 June 2014 yes u r right.

If you r giving loan to Wholly own Subsidiary then u can give loan directly.

but when u r going to give loan to subsidiary u can give in form of guarantee & Security if subsidiary taking loan from bank and financail insitiutions.