Loan to employee under companies act 2013 ???

Loan to Employee by PVT Ltd company under Companies Act 2013 ???

Answer :

As per Section 186 –

No company shall directly or indirectly —

(a) give any loan to ANY PERSON or other body corporate;

(b) give any guarantee or provide security in connection with a loan to any other body corporate or person; and

(c) acquire by way of subscripttion, purchase or otherwise, the securities of any other body corporate,

exceeding sixty per cent. of its paid-up share capital, free reserves and securities premium account or one hundred per cent. of its free reserves and securities premium account, whichever is more.

                So , based on reading above provision , we come to know that section 186 restrict loan to ANY PERSON by company , any person also include employee.

                But, in fact most of company providing loan to employee for some reason like Home loan, Loan for marriage etc, so Ministry of corporate affairs by general circular No 04/2015 clarify that loan and advances made by companies to their employees are not governed by Section 185 and Section 186.

                So , companies need to give loan to employee according to HR policy.

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