To Give
- Loan / Guarantee/security to Director / Director of holding Co / partner or relative of Director OR
- Guarantee/security in connection with loan taken by Pvt Co. in which such director is director or member and the loan is utilised for principal business activities.
![Section 185 of Companies Act - Loan to directors Section 185 of Companies Act - Loan to directors](/img/preview/custom/20210223053958_reconciliation.jpg)
Requirement is
Should Pass special resolution (Explanatory statement shall mention full details of loan / guarantee / security, and purpose.
Exemption
- Private Co. in which no body corporate is shareholder, borrowings from Banks / FI /Body corporate is less than 2 times its paid up capital or 50 crore (whichever is less). And there are no defaults in such borrowings.
- NBFC can give in regular course of business without special resolution.
- If given by Holding company to wholly owned subsidiary company for its principal business activities.
Fines for contravention
- Co: Min 5 lacs. Max 25 lacs.
- Every officer in default - imprisonment of up to 6 months or fine Min 5 lacs. Max 25 lacs or both.
- Recipient - imprisonment of up to 6 months or fine Min 5 lacs. Max 25 lacs or both.
Compliance
MGT 14 has to be filed within 30 days of Special resolution