Pankaj Arora (Learner) (3134 Points)
21 December 2011
Dear Friends
Please let me know that can public limited co. give loan to its director if yes than under which section ? also let me know that can director give loan to company pls tell me the procedure for acceptance and giving loan for both public and private limited company?
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 21 December 2011
Yes, co can give loan to the director by complying the provision of sec 295 of the companies & obtaining the prior approval of the Cent Govt.
The provision of the said section are given below:
295. Loans to directors, etc.—(1) Save as otherwise provided in sub-section
(2) no company (hereinafter in this section referred to as "the lending company"
1[without obtaining the previous approval2 of the Central Government in that
behalf shall, directly or indirectly,] make any loan to, or give any guarantee or
provide any security in connection with a loan made by any other person to, or to
any other person by,
(a) any director of the lending company, or of a company which is its
holding company or any partner or relative of any such director;
(b) any firm in which any such director or relative is a partner;
(c) any private company of which any such director is a director or member;
(d) any body corporate at a general meeting of which not less than twentyfive
per cent of the total voting power may be exercised or controlled by
any such director, or by two or more such directors, together; or
(e) any body corporate, the Board of directors, managing director
3[* * *] or manager whereof is accustomed to act in accordance with the
directions or instructions of the Board, or of any director or directors, of
the lending company.
4[(2) Sub-section (1) shall not apply to—
(a) any loan made, guarantee given or security provided—
(i) by a private company unless it is a subsidiary of a public company,
or
(ii) by a banking company;
1[(b) any loan made by a holding company to its subsidiary company;]
2[(c) any guarantee given or security provided by a holding company in
respect of any loan made to its subsidiary company.]
(3) Where any loan made, guarantee given or security provided by a lending
company and outstanding at the commencement of this Act could not have been
made, given or provided, without the previous approval of the Central
Government, if this section had then been in force, the lending company shall,
within six months from the commencement of this Act or such further time not
exceeding six months as the Central Government may grant for that purpose,
either obtain the approval of the Central Government to the transaction or enforce
the repayment of the loan made, or in connection with which the guarantee was
given or the security was provided, notwithstanding any agreement to the
contrary.
(4) Every person who is knowingly a party to any contravention of subsection
(1) or (3), including in particular any person to whom the loan is made or
who has taken the loan in respect of which the guarantee is given or the security
is provided, shall be punishable either with fine which may extend to 3[fifty
thousand rupees] or with simple imprisonment for a term which may extend to
six months:
Provided that where any such loan, or any loan in connection with which any
such guarantee or security has been given or provided by the lending company,
has been repaid in full, no punishment by way of imprisonment shall be imposed
under this sub-section; and where the loan has been repaid in part, the maximum
punishment which may be imposed under this sub-section by way of
imprisonment shall be proportionately reduced.
(5) All persons who are knowingly parties to any contravention of subsection
(1) or (3) shall be liable, jointly and severally, to the lending company for
the repayment of the loan or for making good the sum which the lending
company may have been called upon to pay in virtue of the guarantee given or
the security provided by such company.
(6) No officer of the lending company or of the borrowing body corporate
shall be punishable under sub-section (4) or shall incur the liability referred to in
sub-section (5) in respect of any loan made, guarantee given or security provided
4[after the 1st day of April, 1956] in contravention of clause (d) or (e) of subsection
(1) unless at the time when the loan was made, the guarantee was given
or the security was provided by the lending company, he knew or had express
notice that that clause was being contravened thereby.
Pankaj Arora
(Learner)
(3134 Points)
Replied 21 December 2011
for taking and giving loan from director should we have to pass an resolution ?
Giridhar S Karandikar
(Team Lead)
(7548 Points)
Replied 22 December 2011
Yes it is required to be passed in the BM.
CA.Aparna Bhosale
(Financial Consultant)
(57 Points)
Replied 04 July 2012
Loan is taken in the name of thePvt closely held Company,Money is used to purchase land for the office of the Company.But the land is to be purchased in the name of the Director.Will the company be able to claim deduction for the interest on the Loan it pay?
Landmark Judgments: Important Provisions of the EPF & ESI Act interpreted by the Honorable Supreme Court of India
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