Loan to its director

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 January 2016 Dear Sir,

Whether Private Company can give loan to Director ? Is it possible subject to approval of shareholders ??

Regards,

Sachin

CA. Divyansh Agarwal

CA. Divyansh Agarwal (Expert)
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08 January 2016 Yes kindly refer to the exemption provided to private companies after amendment in companies act it can give subject to certain limitsNotification currently provides that Section 185 shall not apply to a private company satisfying all of the following conditions:

No body corporate shall have invested any money in the share capital of the company; and
The borrowings of the company from banks, financial institutions or any body corporate shall not not exceed twice the amount of paid-up share capital or INR 500 million – whichever is lower; and
There shall be no subsisting defaults in repayment of such borrowings at the time of making transaction.

CMA Sachin Warat

CMA Sachin Warat (Querist)
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08 January 2016 Thanks Sir. It means within limits specified in exemptions notification private company can grant loan to Director. If it is exceed the Limit, then prohibition on loan to Director.

Querist : Anonymous

Querist : Anonymous (Querist)

09 January 2016 Whether Borrowing from banks mention under exemption to private company includes or excludes CC Loan ?

Ankur Garg

Ankur Garg (Expert)
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12 January 2016 Provisions related to section 185 shall not applicable to a private company if:

(a) in whose share capital no other body corporate has invested any money;
(b) if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower; and
(c) such a company has no default in repayment of such borrowings subsisting at the time of making transactions under this section.

Thanks

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