29 April 2011
As per the provisions of section 295 of the Companies Act, 1956 except with the approval of the Central Government, no Company shall directly or indirectly make any loan, give guarantee or security in connection with a loan made to or by the following:
1. Director of the Company, Director of the Holding Company or partner or relative of any such Director,
2. a firm in which any such Director or relative of any such Director is a Partner,
3. a Private Company in which any such Director is a Director or member,
4. a body corporate at a General Meeting of which not less than 25% of voting rights is exercisable by any one or more such Directors,
5. a Body corporate, the Board of Directors of managing director or any one or more Directors is accustomed to act in accordance with any director of the lending Company.
The provisions of this section are not applicable to an Independent Private Company.
Further, the provisions of this section are not applicable to a loan made by a Holding Company to its subsidiary company or any Guarantee given by Holding Company in connection with a loan made to its subsidiary company.
Approval of the Central Government has to be obtained in E-form 24AB of the Companies(Central Government's) General Rules and Forms, 1956.
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