CA Amit Kumar Khaitan (Research Analyst) (360 Points)
31 July 2010can a company provide interest free loan to another company? Please answer this. I was asked in an interview and I said: "yes, subject to disclosures and Auditor's qualification"
Dheeraj
(Learner)
(1100 Points)
Replied 31 July 2010
if both the co.s are of same person
than this is the matter of substantial interest
and in this case
I think a co. can invest in another co. but can't give loan...
Shwetha
(CA Final)
(67 Points)
Replied 31 July 2010
Hai Amitk..
please refer Sec 372 A for Inter corporate loans (applicable for Public ltd co.)
it prescribes minimum interest rate to be charged for a loan given to another company.
So a public ltd co cannot give interest free loans.
vivek
(CS)
(751 Points)
Replied 31 July 2010
Upto my understanding;
In certain circumstances interest free loan can be providd like a Holding company may give interest free loan to it's wos.
A pvt. company (which is not subsi of a pub. comp.) may give interest free loan.
Likewise, other circumstances have been mentioned in Section 372A itself, whereSection doesn't apply.
Regards,
CAclubindia
