Can company give loans to directors and relatives?

Affluence Advisory | Last updated: 17 August 2022

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The Companies Act, 2013, specifically Section 185, outlines strict rules regarding loans, guarantees, and securities provided by companies to their directors and relatives. Generally, direct or indirect loans to directors, their relatives, partners, or firms they are associated with are prohibited. However, there are specific restrictions and exemptions, such as when a special resolution is passed for loans to interested parties or when loans are part of service conditions for managing directors. Companies whose primary business is lending are also exempt.

Section 185 of the Companies Act, 2013 contains prohibition, restriction and exemption for providing Loan, Guarantee, and Security to the Directors of the Company and any of their relatives. The provisions of Section 185 are divided into four (4) clauses which are as hereunder: Section 185(1):

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Affluence Advisory

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