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INter Corporate Loans

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Querist : Anonymous

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Querist : Anonymous (Querist)
21 April 2011 Sir,

Can a Private Limited company can give loan (INterst Free and Interst Bearing) to a Public Limited company whether haveing any relationship or not with each other.

THis is urgent please.
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Jayashree S Iyer

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Jayashree S Iyer (Expert)
22 April 2011 Yes, loans can be given by the private company to a public company. This will amount to inter corporate loans. Since it's a private company the provisions of Section 372A of the Companies Act, 1956 will not apply to them. So they can lend the money either for interest or without interest. However if it's interest free, the borrowings may attract deemed dividend provisions as per IT Act.

If the transction is between related parties then the provisions of Section 299(Disclosure of interest by the Director holding more than 2% of the paid up capital)and 301 (Entry in the register of contracts in which Directors are interested) of the Companies Act, 1956 are to be complied with.
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