Provision Of Company Act

This query is : Resolved

Vivek Randad (Querist)
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31 March 2008 Company X a Public LTD Company has given advance of Rs.6000000 to a private limited company (Co.Y). And the same was refunded. No contract copy was provided. Henceforth we didn’t know terms & Conditions of contract. Would above transaction covered under any provision of the company’s act? Please explain us.

Kinjal Shah

Kinjal Shah (Expert)
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02 April 2008 It will cover under Section 372A of the Companies Act,1956 for Company X, which is Public Limited Company and Under Section 292 for the Company Y, which is private limited Company. In both the cases Board approval is required in the Board Meeting (not circular).

Moreover, as per Section 372A(2)prior approval of the financial instiution is required in the case of any term loan is subsisting. However, if the loan amount does not exceed the limit of 60% and there is no defult in repaymen of laon than no approval from the financial institution are necessary.

Further, in case the directors of the Company x (Public Limited Company) is also director or relative of director is director in Company Y (private limited) than in that case Section 295 will be applicable.

Further, as per private limited defination private limited company is not allowed to obtain deposit from public except its directors and members. Therefore, in view of the said provision it is advisable to make other body corporate as member of the company by allotting one share.

If we refer defination of deposit given under section 58A, it covers loan of any nature.

Hopefully your query has been resolved, if you still have any doubt, please feel free to revert back.