Clarification of sec 185 of companies act 2013

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Yogitha

Yogitha (Querist)
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18 September 2014 pls explain me the diff of sec 295 and sec 185 of co act 2013 loan to directors

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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18 September 2014 Section 185 of the Companies Act, 2013 is applicable both to private and public companies. This section in general prohibits a company to grant loans or advances or provide guarantees and securities, in any manner, to its directors or other entities in which directors are interested subject to few exceptions discussed below.

Section 295 of the Companies Act, 1956 contained similar provisions, but with two important differences. One, the Section was not applicable to Private Companies. This meant that Private Company was not governed by the restrictions imposed by Section 295 and was free to grant loans to its directors. Secondly, even in case of public companies, these transactions could be undertaken with the approval of Central Government. But now the situation has changed completely.

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