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Query-intercorporate loan-urgent

Mishu (CA) (95 Points)

26 August 2011

Hi everyone,

Our company wants to give unsecured loan to its group company. both the companies have same MD. Loan would without interest.

is it possible?

Please let me know with relevant section applicable

Thanks in advance

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6 Replies

G.L.Subhramanian (PCS) (206 Points)
Replied 26 August 2011

Hi Isha,

Section 372A talks about intercorporate loan.

(1) If your company is a private company, 372A is not attracted. You can give any amount loan to another company.

(2) If your company is the holding company (as you have mentioned it is a group company), 372A is not attracted. You can give any amount loan to another company.

(3) If your company is a public company, 372A is attracted. You cant give loan without any interest. 372A (3) talks about interst rate not being lower than prevailing bank rate. You should abide by the provisions of Section 372A.

Regards,

Subbu

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Mishu (CA) (95 Points)
Replied 26 August 2011

Thanks Mr. Subramanium,

Both the companies are Public company. and we want to make unsecured loan without interest.

G.L.Subhramanian (PCS) (206 Points)
Replied 26 August 2011

Hi Isha,

I feel you cant give unsecured loan to another company without charging interest as ....

it is a public limited company -> attracts Section 372A -> rate of interest should be not lower than the existing bank rate.

As my name was mispelt mostly, i had resorted to Subbu. Kindly address me with the same.

Regards,

Subbu

Mishu (CA) (95 Points)
Replied 30 August 2011

Section 372A will be applicable only when amount of loan exceeds 60% of paid up +free reserves or 100% of free reserves.

The amount of unsecured loan which our company would be giving is less then the above limit.

So plz let me know if we can give loan with interest.

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3468 Points)
Replied 31 August 2011

You should also verify if section 295 is attracted.

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PARUL YADAV (finance expet) (93 Points)
Replied 27 June 2024

Intercorporate loans are loans extended by one company to another within the same group or business conglomerate. These loans are often utilized to manage liquidity or fund short-term financial needs. For businesses looking to arrange such loans, Kotak Mahindra Bank offers tailored corporate banking solutions, including facilitating intercorporate loans. With their expertise and robust financial services, Kotak Mahindra Bank ensures smooth and efficient handling of these transactions, helping companies optimize their capital structure and meet urgent financial requirements.