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Loan to purchase shares

Sowmya P K (Chartered Accountant) (251 Points)

20 February 2009

whether a company, not being a banking or finance company, give loans to outsiders or employees to buy its own shares?

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(Guest)

As per Section77,(2)

No public company, and no private company which is a subsidiary of a public company, shall give, whether directly or indirectly, and whether by means of a loan, guarantee, the provision of security or otherwise, any financial assistance for the purpose of or in connection with a purchase or subscripttion made or to be made by any person of or for any shares in the company or in its holding company:

Exception :-

As per section 77 (2)(c) the company make loans, within the limit laid down in sub-section (3) to persons (other than directors or managers) bona fide in the employment of the company with a view to enabling those persons to purchase or subscribe for fully paid shares in the company or its holding company to be held by themselves by way of beneficial ownership.