LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

Sec 185, 186 & 188 of the companies act, 2013

Sony Sarkar (Company Secretary) (53 Points)

22 December 2014

In case Co. A provides loan to Co. B and both share common directors and also Co. B holds some equity shares in Co. A , below mentioned are my queries:
1. Does this act attract the provisions of Sec 185
2. Can this be treated as Investments of Co. B in Co. A
3. Does this related to any related Party transaction of Co. A & Co. B

Reply
Follow
Share

2 Replies

SOUNDER RAJAN.SP (Assistant Manager) (28 Points)
Replied 28 December 2014

If it's a private company answer is yes This Will not be treated as advance if given as per agreement, interest payable and principal repayable on due date It attracts due to common directorship if private company and if it's an associate company. Ifkn case of public company if it's an associate it's a related party and due to common directorship Please refer section 185 and 186

1 Like

Prachi Dubey (Company Law & Direct Tax Consultant) (25 Points)
Replied 29 December 2014

1. the provisions of 185 shall apply if:

a. Company B is a private company; or

b. directors of Co. A hold 25% or more of capital of Co. B; or

c. director(s) of Co. A control the composition of Board of Company B

Hence in your case since both companies share common director hence it can be said that Sec 185 shall apply.

2. Yes it shall attract the provisions of section 186 as well since 186 governs all the loans given by a company otherwise then to its wholly owned subsidiary.

3. It shall not attract provisions of Section 188 as loan transactions are not covered in related party transactions under companies act 2013.