loan to private company (Corporate Law)

This query is : Resolved

Nipa

( Author )
10 November 2010

Can one private company give loan to other private company...i know 372A is applicable to only to the public company..

kindly suggest

CA. SANAT PYNE

( Expert )
10 November 2010

Yes, it can .372 A will be applicable if it is a subsidiary of a public company otherwise not.

Ankur Garg

( Expert )
10 November 2010

According to me it is very much possible provided this kind of activity is not a regular one.

However the same should be supported by a detailed board resolution with all terms and conditions.

Wait for other opinions.

Regards

Aditya Maheshwari

( Expert )
10 November 2010

It can be done and should be supported via board resolution u/s 292

Nipa

( Author )
10 November 2010

Thank you all for kind reply. Further to my query, pd up capital of borrowing co. is 90 lacs and co. wants to take loan of Rs. 1 Cr. As I told, both are Private Ltd. and Director of both companies are same. So In this case apart from Board resolution, is there any other thing require to check.

Aditya Maheshwari

( Expert )
10 November 2010

No. Provisions of section 293(1)(d) for taking loan does not apply to private company exceeding the paid up capital & reserves.

Nipa

( Author )
10 November 2010

Thanks Aditya!

Ankur Garg

( Expert )
10 November 2010

Agree with Expert Aditya. There is no prob if loan amt exceeds the aggregate of paid up capital and free reserve as section 293 is not applicable to a private company.

But be careful about the debt-equity ratio and liquidity. Rest is fine.

Regards

Nipa

( Author )
10 November 2010

OK. Thanks Ankur.