Loan to director
This query is : Resolved
16 June 2016
Please refer to Section 185 of the Companies Act 2013 in this reference.
The section 185 of CA, 2013, restrict the company on giving loans, guarantee or provide security to Directors or any other person in whom Director is interested.
However there are certain exclusion too i.e. where it can be given:
(a) the giving of any loan to a managing or whole-time director—
(i) as a part of the conditions of service extended by the company to all its
employees; or
(ii) pursuant to any scheme approved by the members by a special
resolution; or
(b) a company which in the ordinary course of its business provides loans or
gives guarantees or securities for the due repayment of any loan and in respect of such
loans an interest is charged at a rate not less than the bank rate declared by the
Reserve Bank of India.
The section 185 of CA, 2013, restrict the company on giving loans, guarantee or provide security to Directors or any other person in whom Director is interested.
However there are certain exclusion too i.e. where it can be given:
(a) the giving of any loan to a managing or whole-time director—
(i) as a part of the conditions of service extended by the company to all its
employees; or
(ii) pursuant to any scheme approved by the members by a special
resolution; or
(b) a company which in the ordinary course of its business provides loans or
gives guarantees or securities for the due repayment of any loan and in respect of such
loans an interest is charged at a rate not less than the bank rate declared by the
Reserve Bank of India.
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