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Section 186

krunal PIPALIA (9 Points)

29 March 2018

Upto what revised limit company can provide loan to any other as per section 186

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Parminder Singh (744 Points)
Replied 29 March 2018

Sec 186(2)- 60% of (paid up SC + Free Res + Sec Prem), or
100% of ( Free Res + Sec Prem),
whichwver is lower.
Sec 186(3)- if loan + investment + guarantee+ surety both present and proposed exceeds the avove limit, prior approval of members at GM bu paasing SR is needed.

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Rahul Prajapati (Student) (2282 Points)
Replied 30 March 2018

In pursuant to provisions of Section 186(2) of the Act,

No Company shall directly or indirectly give any loan to any person or other body corporate, give any guarantee or provide security in connection with a loan to any other body corporate or person and acquire by way of subscriptttion, purchase or otherwise, the securities of any other body corporate :

1.Exceeding 60% of its paid-up share capital plus free reserves plus securities premium account or

2.100% of its free reserves plus securities premium account, whichever is more

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krunal PIPALIA (9 Points)
Replied 30 March 2018

Thank you sir for your reply I got the concept but sir if possible can you please provide me the example for section 186(3).

Parminder Singh (744 Points)
Replied 30 March 2018

PUSC= 10 lacs; Gen Res= 15 lacs; Sec prem= 5 lacs. Loan already given to X Ltd. = 4 lacs.
Co proposing to give loan to Y Ltd. (i) 12 lacs or (ii) 18 lacs.
Step 1= max limit u/s 186(2)= 60 % of 40 lacs or 100% of 20 lacs whichever is lower = 20 lacs
Step 2= apply sec 186(3)=
case (i)= present loan given + proposed to be given = 4+12= 16 lacs which is within limit of Step 1, So no approval of members needed.
case (ii)= 4+18= 22 lacs which is crossing the limit of Step 1. Thus, as pr sec 186(3), prior approval of members at general meeting by special resolution needed before disbursing loan of 18 lacs to Y Ltd.