Loan to Directors

This query is : Resolved

TARUN JAIN (Querist)
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16 February 2009 Section 295 prohibits company to make any loans to:

a) any director of the lending company, or of a company which is its holding company or any partner or relative of any such director;
b) any firm in which any such director or relative is a partner;
c) any private company of which any such director is a director or member;
d) any body corporate at a general meeting of which not less than twenty-five per cent of the total voting power may be exercised or controlled by any such director, or by two or more such directors, together; or
e) any body corporate, the Board of directors, managing director or manager whereof is accustomed to act in accordance with the directions or instructions of the Board, or of any director or directors, of the lending company.

Query:

Where a Public Limited company makes loans to a Private Limited Company in which no director of public limited are director/relative/partner in private limited. Subsequently, one of the directors of public limited becomes director in private Limited. Whether, it is contravention of section 295 of Companies Act.

Jagruti (CS)

Jagruti (CS) (Expert)
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15 April 2009 No, there is no contravention of Sec. 295 as it is applicable at the time of making of loan.

As in your case, 295 exists after making of loan. thus, it is not contravention

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