08 August 2009
A company has constantly taken amount from its sister concern in cash( Rs.300000), both have a same director. The companies are not in any transaction with each other like sale or purchase. is section 58 A and 58AA and 296 and there is any necessity to maintain register regarding section 301. Also tell what points regarding this querry should be disclosed in audit report.
Entry in Section 301 register desired where section 297 and 299 is attracted. So if a director is directly or indirectly interested in a contract disclosure u/s 299 is required and accordingly entry is required to be made in Section 301 register.
21 July 2024
Certainly! Let's break down the concepts and relevant sections under the Companies Act, 2013 regarding Loans (Liabilities) and Deposits (Liabilities), especially in the context of transactions between related entities like sister concerns.
### Loans (Liabilities):
**Definition:** A loan is an amount of money borrowed by a company typically from banks, financial institutions, or related parties. It is recorded as a liability on the company's balance sheet and must be repaid according to the terms agreed upon.
**Regulation under Companies Act, 2013:** 1. **Section 58A:** This section deals with the acceptance of deposits by companies and prescribes rules and regulations for acceptance of deposits.
2. **Section 58AA:** Provides detailed regulations regarding the repayment of deposits, interest payment, and compliance requirements related to deposits accepted by companies.
### Deposits (Liabilities):
**Definition:** Deposits are funds placed with a company, often by its stakeholders or related parties, under terms and conditions that typically include the repayment of principal and interest.
**Regulation under Companies Act, 2013:** 1. **Section 58A and Section 58AA:** These sections also cover deposits, but from the perspective of acceptance by the company rather than lending.
### Specific Scenario and Sections:
Given the scenario where one company (Company A) takes a cash amount of Rs. 3,00,000 from its sister concern (Company B), and both companies share a common director, here are the considerations regarding applicable sections under the Companies Act, 2013:
1. **Section 185:** This section pertains to loans to directors and related parties. It restricts companies from advancing any loan, including inter-corporate loans, to any of its directors or to any other person in whom the director is interested, except as provided in certain specified exemptions.
2. **Section 186:** Deals with loans and investments by companies. It sets out conditions under which a company can provide loans, guarantees, or security in connection with a loan to any person or entity.
3. **Section 301:** Requires maintenance of certain registers by companies for transactions with related parties. It mandates the disclosure of transactions in the board's report.
### Practical Considerations:
- **Compliance:** Ensure compliance with Sections 185 and 186 if Company A is advancing a loan to its director or any related party (including another company where the director has an interest).
- **Register Maintenance:** Maintain a register under Section 301 of the Companies Act, 2013, to record transactions with related parties like the sister concern (Company B). This register should include details of the transactions, nature, and terms.
- **Audit Report Disclosure:** In the audit report, the auditor should disclose: - Details of loans given by the company, including loans to directors and related parties. - Compliance with Sections 185 and 186 of the Companies Act, 2013. - Adequacy of register maintenance under Section 301, if applicable. - Any non-compliance or deviations noted during the audit related to loans and related party transactions.
### Conclusion:
In summary, loans and deposits are financial transactions that involve the lending or borrowing of money, but they differ in terms of who initiates the transaction and the direction of the funds. For the scenario described, it's important for Company A to comply with Sections 185, 186, and maintain a register under Section 301 to ensure transparency and adherence to legal requirements under the Companies Act, 2013.
Consulting with a qualified company secretary or legal advisor can provide further insights into the specific compliance requirements and reporting obligations under these sections.
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