Section 25 Company

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RItu (Querist)
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14 November 2007 When a company has advance receivable outstanding from a educational society ( it being registered under society registration act, 1860) members being same in majority, does it needs to be disclosed in the auditors report in the annual return??, coming under the same management, section 370 (IB)

OR
another interpretation is that the Sections like 301,370(IB) does not attract as it is not assigned a corporate status, being registered underthe society registration act, 1860

Question is how to substantiate that the disclosure not made in the Auditors report of annual return is correct??

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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14 November 2007 why you call it section 25 company ........is it registered under section 25 of companies ACT???

KAAPIL

KAAPIL (Expert)
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14 November 2007 Please clarify.

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RItu

RItu (Querist)
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14 November 2007 A Public limited company has given advance payment to a educational society registered under the Society Registration Act, 1860, 2 of the directors of the said company are also a part of that society as CHiarmana and member,

Now question is that does it attract section 301 and 370 (IB),and if yes then does the same needs to be disclosed in teh auditors report in annual return

Because the auditor in his report says that
1)Co has paid adv to one party covered in register maintained under section 301

and in other point says that

2) Co has not granted loans, secured or unsecured to parties listed under section 370 (IB) of the companies act

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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14 November 2007
LOAN TO DIRECTORS BY A PUBLIC LIMITED
COMPANY*
140.1 Background note
A company is permitted to make loans to its directors subject to certain
restrictions and fulfilment of conditions. These restrictions are imposed in
order to protect the interests of the shareholders.
140.2 Applicability
The provisions given in this chapter are applicable to any loan given or
guarantee provided or security given in connection with the loan made by any
public company or a private company being its subsidiary to -
u any director of the lending company or of a company which is its holding
company or any partner or relative of any such director;
u any firm in which such director or relative is a partner;
u any private company of which such director is a director or member;
u any body corporate at a general meeting of which not less than 25% of the
total voting power may be exercised or controlled by any such director,
or by two or more such directors together;
u 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.
*RELEVANT PROVISIONS :
u Companies Act, 1956 : Sections 295, 296.
u Companies (Central Government’s) General Rules and Forms, 1956.
u Standard Listing Agreement.
APPLICABILITY : PUBLIC LIMITED COMPANY.
140.2-1 Applicability to book debts
The provisions given in this chapter are applicable to all transactions represented
by a book debt which was from its inception in the nature of a loan or
advance.
140.3 Non-applicability
The provisions given in this chapter are not applicable to the following loans or
guarantees or securities -
u Loans made by a holding company to a subsidiary or guarantee given or
security provided by a holding company in connection with a loan to its
subsidiary;
u Loans made or guarantee given or security provided by a private
company which is not a subsidiary of a public company ;
u Loans made or guarantee given or security provided by a banking
company;
u House building loan to Managing Director or whole-time director or any
guarantee given by the company in connection with the house building
loan. However, the terms and conditions of house building loan should
be on the terms and conditions as are applicable to all its employees.