Section 372a
This query is : Resolved
19 August 2013
Whether section 372A is applicable to NBFC's?
19 August 2013
thanx for quick reply.........but can u explain section 372a...........
19 August 2013
You are welcome Sonia…
372 A relates to Intercorporate loans and Investments. It basically says, that a company can give loan or advance to another company to the maximum of 100% of its free reserves or 60% of Paid up Capital plus free reserves, whichever is higher.
If the company wants to go beyond this limit, it has to pass a special resolution in a General Meeting
372A does not apply to following
1. Loan / Guarantee / Security / Investment made / given by:
A Bank, Insurance Company in ordinary course of business, Housing Finance Company,
A Company established with the object of financing industrial enterprises or providing
infrastructural facilities,
A Company whose principal business is the acquisition of shares, stock, debentures or
other securities,
A Private Company, unless it is a Subsidiary of a Public Company.
2. Investment made in shares allotted u/s 81(1)(a), i.e. Rights Shares,
3. Loan made by a Holding Company to its wholly – owned Subsidiary,
4. Guarantee given or security provided by a Holding Company, in respect of loan made to its
wholly – owned Subsidiary, or
5. Acquisition by a Holding Company by way of subscription, purchases or otherwise, the
securities of its wholly – owned Subsidiary.
Hope it is clear…if you have any doubts…feel free to ask
372 A relates to Intercorporate loans and Investments. It basically says, that a company can give loan or advance to another company to the maximum of 100% of its free reserves or 60% of Paid up Capital plus free reserves, whichever is higher.
If the company wants to go beyond this limit, it has to pass a special resolution in a General Meeting
372A does not apply to following
1. Loan / Guarantee / Security / Investment made / given by:
A Bank, Insurance Company in ordinary course of business, Housing Finance Company,
A Company established with the object of financing industrial enterprises or providing
infrastructural facilities,
A Company whose principal business is the acquisition of shares, stock, debentures or
other securities,
A Private Company, unless it is a Subsidiary of a Public Company.
2. Investment made in shares allotted u/s 81(1)(a), i.e. Rights Shares,
3. Loan made by a Holding Company to its wholly – owned Subsidiary,
4. Guarantee given or security provided by a Holding Company, in respect of loan made to its
wholly – owned Subsidiary, or
5. Acquisition by a Holding Company by way of subscription, purchases or otherwise, the
securities of its wholly – owned Subsidiary.
Hope it is clear…if you have any doubts…feel free to ask
19 August 2013
as you replied that it is not applicable to NBFC.....it is nowhere written in the section......is it your opinion or is it written somewhere?
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