Applicabilty of sec 185

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Gaurav Sharma (Querist)
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22 June 2016 Dear experts , please let me know can a public ltd company give loan to its partly owned subsidiary and associate companies if they have a common director.

Jatin Bajaj

Jatin Bajaj (Expert)
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25 June 2016 Yes,according to section 186 of companies act company can give loan to any person or body corporate and term body corporate is a wider term which includes both indian company, foreign company as well as associate company . company can give loan upto 60% of agregate paid up capital and free reserves or 100% of free reserves whichever is higher by simply passing board resolution.
Further section 185 is not attracted in giving loan to wholly owned subsi company or subsidiary company.In such a case section 186 shall be attracted. to attract section 185, it must attract the personal liability of director

Jatin Bajaj

Jatin Bajaj (Expert)
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Gaurav Sharma

Gaurav Sharma (Querist)
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26 June 2016 Thank you so much Sir........Yes, I completely agree with you that Sec 185 is not attracted in case of wholly owned subsidiary,but it is silent upon associate and partly owned co. having common directors.Further, i heard that the limits given in sec 186 also includes securities premium along with paid up share capital and fresh reserves and the board resolution must be unanimously passed.Please correct me if I am wrong.

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