28 October 2011
A limited company with 5 directors (lending co.) wants to give loan to a limited company having 4 directors (borrowing co.), out of which 3 directors are common in both the companies. According to sec. 295(1)(e), no company without obtaining the previous approval of the central govt. make any loan to any body corporate, the board of directors 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. Query: Whether in the present case, the board of directors of borrowing co. can be construed as accustomed to act in accordance with directions/ instructions of the directors of the lending co.?
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