Loan

This query is : Resolved 

27 March 2014 MR. X DIRECTOR IN BOTH A AND B COMPANY. COMPANY A LOAN GIVEN TO COMPANY B. TRANSACTION IS VALIED AS PER NEW COMPANIES ACT, 2013 ?

27 March 2014 Kindly share the details such as nature of companies and shareholding of companies. ..

28 March 2014 COMPANY A MANUFACTURING COMPANY AND B IS PRIVATE LIMITED COMPANY. DIRECTOR HOLD MAJOR SHAREHOLDING IN BOTH COMPANIES.


28 March 2014 Hi Amit,

Initially your case can be seen as below:

1. The Lending company can be a public or private company since Section 185 is applicable to both the companies.

2. Since in our case, B is a private limited company and director of A ltd is also a Director of B pvt Ltd, the loan transaction will be attracted by Clause (c) to explanation to Section 185(1).

3. Further director of A ltd also holds shares in B ltd again the same clause will be applicable as mentioned above.

To conclude, Loan from A ltd to B Pvt Ltd is prohibited under Section 185.

Scenario from April 1, 2014 will be as under:

1. Loan/guarantee/security from holding company to wholly owned subsidiary is exempted under Rule 10(1) of Companies (Meeting of Board and its power) Rules, 2014.

2. Guarantee/Security given by holding company to banks and financial institution for the loan borrowed by subsidiary company is exempted under Rule 10
(2) of the said rules.

If B pvt Ltd is a subsidiary company of A Ltd, then the loan will not be prohibited from April 1, 2014. Prior to April 1, 2014 it is prohibited since there was no exemption prior to this date.



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