Section 185 & 186

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Birendra Dutta (Querist)
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30 November 2015 Good evening.

I have query in Section 185 & 186 of the Companies Act 2013.

There are three companies in which there are three common directors in each of the companies who do not hold any shares in the company.

All shares are hold by foreign company.

Now
1. There are inter company loan transactions.

2. Expenses are shared between all three companies through journal entries.

My question is:

Whether Section 185 and Section 186 applicable to these companies and

If the auditors give qualified opinion u/s 185 that there is loan granted transaction in any one of the company, what is the option available to the company to overcome the situation.

What would be best directors reply to qualified opinion of auditors to avoid any further litigation or to avoid penalty.?

And what would be the consequences of the qualified opinion by auditors u/s. 185 of loan granted u/s. 185 of the companies Act 2013 in future for submitting in AOC-4.

Pratik Shah

Pratik Shah (Expert)
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01 December 2015 One solution I feel is to execute Expense Sharing Agreement between these three Companies. However, you also need to consider taxation effect on this.