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Inter Corporate Loans-372A

Ruchie Khanna (Company Secretary) (123 Points)

27 April 2010

Dear Professionals,

My query relates to inter corporate loans.

A pvt. Ltd. company needs to give a loan to a public Ltd. co. I am aware that S. 372A does not apply to this loan transaction. However, the Pvt. Ltd. company has only 2 Diretors of whom one is an interested Director. Thus, loan resolution cannot be passed since there would be no valid quorum for the meeting.

In view of the above, can the Pvt. Co. passed a resolution for advancing loan at an EGM and what are the consequences of having common shareholders.

Pl. Help..!!

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4 Replies

Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 27 April 2010

According to me hold a board meeting to fix the date of EGM and simply get the transaction approved by shareholders at the EGM.

Another option would be --- increase the strength of board of directors by appointing additional directors u/s 260 to avoid the problem of lack of quorum.

Other Views solicited.

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Ruchie Khanna (Company Secretary) (123 Points)
Replied 27 April 2010

Thank you.

However, if the common director is also a shareholder of the public co. holding 16 % of the shares would this have any impact on the loan transaction???

Suman Khurana (ACS) (209 Points)
Replied 27 April 2010

According to me presence of interested director can also be counted to constitute the valid quorum. Section 300 is not applicable to independent pvt. ltd. company.