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Section 186

RoHaN k (CA & CS) (308 Points)

13 June 2014

Section 186 : Whether company need to take case to case approval or blanket approval ?

If it is case to case , please tell , where it is specificaly mentioned so. [ in Act or Rules ]

Only because erstwhile 372A , made it case to case approval , thats why should we interprete it that CA 2013 also mandate to take case by case approval ?

Please share your views

Thanks

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8 Replies

Vandana J Doshi (Practising Company Secretary) (12562 Points)
Replied 16 June 2014

Hi Rohan, In my view and as per the interpretation of the rules, a blanket resolution is allowed.... You check the provisions of the rules for the same.... Regards

RoHaN k (CA & CS) (308 Points)
Replied 18 June 2014

Vandana J Doshi (Practising Company Secretary) (12562 Points)
Replied 18 June 2014

Hi, Pls refer point no 2 of rule 13 of the chapter 12 rules.....

RoHaN k (CA & CS) (308 Points)
Replied 18 June 2014

Yes mam

It has said ''The Total Amount total amount up to which the Board of Directors are authorised to give such loan or guarantee, to provide such security or make such acquisition: ''

That means the provision of erstwhile 372A mandating - case to case is not applicable

RoHaN k (CA & CS) (308 Points)
Replied 18 June 2014

Thank You very much

Aakansha Jain (Company Secretary in Practice) (32 Points)
Replied 17 July 2014

Rule 13. Chapter 12

Special Resolution.-(1) Where the aggregate of the loans and investment so far made, the amount for which guarantee or security so far provided to or in all other bodies corporate along with the investment, loan, guarantee or security proposed to be made or given by the Board, exceed the limits specified under section 186, no investment or loan shall be made or guarantee shall be given or security shall be provided unless previously authorised by a special resolution passed in a general meeting.

Explanation.-For the purpose of this sub-rule, it is clarified that it would sufficient compliance if such special resolution is passed within one year from the date of notification of this section.

My query is as per the explanation given whether a private limited company who has given guarantee or provided security exceeding the limits of 186 before 31.03.2014, needs to comply with passing of Special Resolution within one year from the date of notification of this section.

Pls guide

RoHaN k (CA & CS) (308 Points)
Replied 17 July 2014

Explanation.-For the purpose of this sub-rule, it is clarified that it would sufficient compliance if such special resolution is passed within one year from the date of notification of this section.

provisions are applicable for transaction entered only after 01.04.2014.

It is advisable to take SR for the loans/investment made / securities already given. and such resolutions should be passed before 01.04.2015.

VIRAAJ VASHISHTH (81 Points)
Replied 02 March 2024

Applicability of Section 186 to NBFCs: Understanding the Nuances

Section 186 of India's Companies Act of 2013 governs inter-company loans and investments made by domestically domiciled corporations. This provision places limitations on how extensively a company can provide funds, guarantees, or acquire securities of other firms. That notwithstanding, selected entities are exempted from these constraints, such as specific financial institutions.

This piece examines if Section 186 applies to non-bank financial organizations and delves into the applicable stipulations and exemptions. It also explores a few examples of complex inter-company transactions between corporations and scrutinizes whether these types of arrangements would fall within or outside the boundaries established by Section 186. In addition, some instances are discussed where companies have structured transactions in an attempt to circumvent these rules but were later found to still be in violation.