29 December 2010
IS CLB permission (u/s.295 of companies act,1956) for taking xyz ltd. as co-borrower for the loan taken in personal capacity of directors to be submitted before disbursement.
Please give me full details about filling form to Roc and section 295?
30 December 2010
If the loan is in the personal capacity of director for his personal use, I don't think company can be made a co-borrower. The company can only give guarantee or security.
Experts please give your comments on this.
The company being a public limited company, Central Government approval is needed for giving guarantee or security to the loan taken by its diretor. No specific form for application to be made to CG. Make an application a a plain paper prefereably on the letter head of the company giving full details of the loan and the security / guarantee provided. A copy of the application to be delivered to ROC.
As per the provisions of section 295 of the Companies Act, 1956 a Public Limited Company intending to give loan to its Director or give guarantee/provide security in connection with a loan made by a third party to a Director of the Company, has to obtain the prior approval of the Central Government in prescribed form. The form prescribed under Companies (Central Government) General Rules and Forms, 1956 is Form 24AB and the application should be made in this form only and not on the letter head of the Company as opined by Expert Jayashree Mam!
Agreed with the view of expert that since the Loan is borrowed by the Director in his personal capacity, the Company cant be made co-borrower.
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