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Loan by private company to public company ?

Shiva Arunachalam (Student CS) (92 Points)

06 October 2016

Dear Experts / Friends Our Client has an Private Company and as well as an Public Limited Company !!! Both Company has Common Director and Shareholders ... Now the Private Company wants to advance a loan to the Public Limited Company !!! Is it allowed as per the latest Exemption to Private Companies ? Can the Public Company accept the loan ? Kindly explain the impact of Sections 185,186, etc...

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6 Replies

cs nidhi (job) (58 Points)
Replied 07 October 2016

Public Company cannot accept the loan from private company as there is common director.

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Shiva Arunachalam (Student CS) (92 Points)
Replied 07 October 2016

Thanks for replying ... Could you please suggest any other alternative route ?

cs nidhi (job) (58 Points)
Replied 07 October 2016

There is no alternative except to change the directors in any 1 of the company. As the companies act is very stringent regarding the acceptance and giving of loan

Shiva Arunachalam (Student CS) (92 Points)
Replied 07 October 2016

Even the Majority of the Shareholding is Common ... Is there a way to issue debentures for the loan availed.

cs nidhi (job) (58 Points)
Replied 07 October 2016

Loan cannot be availed only. How can you issue debentures for the loan u want to take if there is common director !

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Shiva Arunachalam (Student CS) (92 Points)
Replied 07 October 2016

Can you please specify where or in what provision it has been said that public company cannot take loan in case of common director ? If you are refering to Section 185 !!! It is relaxed in view of the exemption ?