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Advances made to director is voilation u/s 185

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(Querist)
21 December 2014 company has made advances to director is it voilation u / s 185. ?
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PRADEEP KUMAR VATS

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PRADEEP KUMAR VATS (Expert)
27 December 2014 Dear Vibhor

As per sec-185, No company shall give advance or provide security or guarantee for loan taken by others in whom director is interested otherwise company shall be punishable with fine Rs.5lakhs which may extend to Rs.25lakhs and director or other person to whom loan is given or security is provided is punishable with imprisonment which may extend to 6months or fine from 5lakhs to 25lakhs or with both.

Two exception are there:
1) loan is given to MD or whole time director-
. as a part of service extended of all its employees or
. pursuant to any scheme approved by members by SR.
2) company which in the ordinary course of business provides loans or given guarantees or securities for loan taken by other and the rate charged against loan is not less than the rate declared by RBI.

Regards
Pradeep kumar
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