Section 372a

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Querist : Anonymous (Querist)

02 November 2012 whether section 372A provide exemption to subsidiary co giving loan to holding co.

CA Manish

CA Manish (Expert)
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02 November 2012 Exemption is available in case of wholly owned subsidiary.

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Querist : Anonymous

Querist : Anonymous (Querist)

02 November 2012 it means a subsidiary co can give loan to its holding company without any limit and if subsidiary co is public limited company than also exemption will be available? please clarify.

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CA Manish

CA Manish (Expert)
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02 November 2012 Exemption:
As per Sec 372A (8) nothing contained in this section shall apply

a) To Banking company

b) A company whose principal business is the acquisition of shares, stock, debentures or other securities.
This can be considered as NBFC/ Investment company. Before availing exemption under the category, it is advisable to check compliance with NBFC relevant laws/rules/regulation/RBI directions.

c) To a private company, unless it is a subsidiary of public company

d) To investment made in shares pursuant to sec. 81(1) (a) – Rights shares.
(This is can be happen only in case right issue offer by public company because the section 81 is inapplicable to private companies. Right shares offered by private company as per its articles or otherwise can not be said to have been offered u/s. 81(1) (a) and therefore investment in rights shares issued by private company can not be eligible for exemption u/s.372A.

Here, It worth to make it clear that, the above will be counted for the purpose of subsequent investment / loan/ guarantee / securities.

e) To any loan made by holding company to it’s wholly owned subsidiary

f) To any guarantee / security by holding company, in connection with loan made to it’s wholly owned subsidiary company

g) To acquisition by a holding company, by way of subscription, purchases or otherwise, the securities of its wholly owned subsidiary

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Querist : Anonymous

Querist : Anonymous (Querist)

02 November 2012 thank u sir