loan to private company

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This query is : Resolved

Nipa (Querist)

10 November 2010 Can one private company give loan to other private company...i know 372A is applicable to only to the public company..

kindly suggest

CA Sanat Pyne

CA Sanat Pyne (Expert)

10 November 2010 Yes, it can .372 A will be applicable if it is a subsidiary of a public company otherwise not.

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Ankur Garg

Ankur Garg (Expert)

10 November 2010 According to me it is very much possible provided this kind of activity is not a regular one.

However the same should be supported by a detailed board resolution with all terms and conditions.

Wait for other opinions.

Regards

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Aditya Maheshwari

Aditya Maheshwari (Expert)

10 November 2010 It can be done and should be supported via board resolution u/s 292

Nipa

Nipa (Querist)

10 November 2010 Thank you all for kind reply. Further to my query, pd up capital of borrowing co. is 90 lacs and co. wants to take loan of Rs. 1 Cr. As I told, both are Private Ltd. and Director of both companies are same. So In this case apart from Board resolution, is there any other thing require to check.

Aditya Maheshwari

Aditya Maheshwari (Expert)

10 November 2010 No. Provisions of section 293(1)(d) for taking loan does not apply to private company exceeding the paid up capital & reserves.

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Nipa

Nipa (Querist)

10 November 2010 Thanks Aditya!

Ankur Garg

Ankur Garg (Expert)

10 November 2010 Agree with Expert Aditya. There is no prob if loan amt exceeds the aggregate of paid up capital and free reserve as section 293 is not applicable to a private company.

But be careful about the debt-equity ratio and liquidity. Rest is fine.

Regards

Nipa

Nipa (Querist)

10 November 2010 OK. Thanks Ankur.

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