CAN A PVT. CO. GIVE LOAN TO ITS DIRECTORS/RELATIVES ON INTEREST??
Vandana J Doshi
(Practising Company Secretary)
(12562 Points)
Replied 22 April 2014
Only if it is an NBFC and its ordinary business is to provide loans or guarantees or securities at an interest not less than the RBI rate. Otherwise the same is strictly prohibited in the new Act.....
CS MOHIT SALUJA
(PRACTICING CS Jalandhar 9914558709)
(5155 Points)
Replied 22 April 2014
Section 185 specifically rohibits all the company to give any loan/ guarantee/ security to its directors or the persons in whom the director is interested.
Moreover, no company can give any loan to an indiviadual unless and untill it has obtained NBFC Certificate from RBI. Only if it is an NBFC and its ordinary business is to provide loans or guarantees or securities at an interest not less than the RBI rate. Otherwise the same is strictly prohibited in the new Act....
However, a company can invest and provide loan under section 186 to the other corporate.
Rajiv Agrawal
(Company Secretary)
(82 Points)
Replied 22 April 2014
| Originally posted by : MOHIT SALUJA | ||
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Section 185 specifically rohibits all the company to give any loan/ guarantee/ security to its directors or the persons in whom the director is interested. Moreover, no company can give any loan to an indiviadual unless and untill it has obtained NBFC Certificate from RBI. Only if it is an NBFC and its ordinary business is to provide loans or guarantees or securities at an interest not less than the RBI rate. Otherwise the same is strictly prohibited in the new Act.... However, a company can invest and provide loan under section 186 to the other corporate. |
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Mohit ji,
On the question "whether a corporate company can provide loans to other body corporate in which directors are interested?" the answer is no and every body is suggesting the same.
But I want to know that Sec. 295 & 372a are same to Sec. 185 & 186.
How in old act company provide loans to related company under 372a and escapes sec. 295?
Please reply
CAclubindia
